Analytic Study On Korea's IT Infrastructure

Informatization Policy
Analytic Study on Korea

s IT Infrastructure
Development Policies
Young-Ro Lee
Byong-Cho Kim
Seong-Wook Na
Jung-Hwae Hu
(National Information
Society Agency)
(Hankuk University)
Society Agency)
Society Agency)
Policy of upgrading the analysis of Korea

s IT infrastructure Y. R. Lee, B. C. Kim, S. U. Rha, J.
H. Hur With subscription to broadband Internet services reaching 10 million households in 2002,
Korea has been dubbed the top broadband nation by international organizations such as ITU and OECD.
National infrastructure plays a very important role in the industrial development of a nation. In particular, IT
infrastructure has made Korea the world
s No.1 for the first time in history. This is attributed to the
informatization policy that has been constantly pursued for the last 20 years. In keeping with such
informatization policy, the project on building the infra for high-speed communication network had been
continuously carried out from 1995 to 2005 since the newly established Ministry of Information and
Communications (MIC) in 1994.
The government
s aggressive and relentless efforts to implement such policy, Korea
s unique business
model, selection of ADSL techniques for initial Infra deployment, high priority investment to isolated and
vulnerable areas from IT distribution such as schools and rural districts, establishment of a pro-cyclical
investment structure led by the government, and the country
s cultural and environmental characteristics are
cited as the key success factors. Today, the construction of the high-speed infrastructure over the whole
nation is nearly complete. The next step is upgrading the infrastructure by one notch to provide
telecommunications and broadcasting convergence services such as IPTV, gigabyte speed internet services. A
new strategy that will enable Korea to sustain its global leadership in the IT field is also required.
Abstract
Keywords : high speed communication network, high speed Internet, high speed national network, Powerful IT player,
Infrastructure Policy
Index (ITU) for three consecutive years, and 1st in
. Introduction
terms of the high-speed broadband penetration
Having achieved high global recognition in a
rate (OECD), Korea is now enviously recognized
number of international IT indexes, such as
as the foremost Digital Power Nation
ranking 3 in the National Informationization
throughout the world. Many countries are
Index (NIA) in 2007, 1 in the Digital Opportunity
understandably interested in the factors behind
rd
st
This is an excellent paper selected among those published in Informatization Policy. Informatization Policy provides the English version of
this paper in order to promote The achievements and current status of korea
s informatization policies.
such success, as well as in the developmental
advanced nations focused their national
process of Korea
s high-speed information and
attention on building high speed broadband
telecommunication infrastructure. Notably, some
network,
of the world
s leading international organizations
infrastructure for economic growth in the
including the OECD and the ITU have even
information age. Korea was no exception.
recommended their member nations to
Commencing from the mid90s, in line with the
benchmark Korea
s development and success
global trend such as the National Information
model with regard to high-speed broadband
Infrastructure (NII) of USA, Korea established
infrastructure.
the High Speed Broadband Network
recognized
as
the
essential
During the early 1980s, Korea

s informationization
Infrastructure Development Plan in 1994 and
was centered mainly on the installation of
from 2005, Korea implemented the plan in three
computers by individual government branches
stages of developing and upgrading the
and on the development of databases for their
broadband network in order to become the IT
affiliated agencies, but since the mid 1980s, the
Power Nation. As a result, by 2001, Korea
database functionalities have advanced to
completed fiber optic network connecting not
become the foundation for the project to build
only the major cities but small and mid sized
the national basic information system. In 1986,
cities and communities as well and created high
theAct on the Expansion and the Promotion of
speed broadband networked environment in
the Use of Computer Networkswas enacted to
which anyone can enjoy high speed multimedia
establish a legal basis for the development of the
internet service wherever, and whenever (MIC,
national basic information system. Then, in 1987,
NIA, 2005b).
in a drive to enhance efficiency in the public
Currently, there are over 14 million high speed
sector and establish a firm basis for the growth of
broadband subscribers in Korea with household
the IT industry, the government launched the
penetration rate surpassing 90% (NIA, 2007).
National Basic Information System Project to
Commencing in 2002, efforts was launched to
build a network connecting the five government
build digital academic infrastructure with
sectors of administration, finance, education and
projects such as e-Learning1), which connected all
research, defense, and public security, and set
of the elementary, junior high, and high schools
about securing the integrated operation of
throughout the country with high speed
the network (Ministry of Information and
broadband service. In addition, Korean
Communication (MIC), National Information
government and telecommunication companies
Security Agency (NIA), 2005a).
collaborated in building high speed broadband
As the world entered into the

90s, each
network in rural and less populated districts,
1) e-Learning is a new academic paradigm focused on students and provides an environment in which the students can learn about the subjects
of interest, from anywhere and at anytime via internet connection (Ministry of Education).

s IT Infrastructure Development Policies
where private companies were reluctant to make

investments, and by 2008, full nationwide high
speed broadband network was established.
However, behind such successful construction
of nationwide broadband network, there
were frictions during the process of getting
see even if such speed can be achieved.)

Can telecos build and operate the
broadband network at monthly service fee
of 30,000 KRW per subscriber?
Can service to rural and less populated area
be provided at an equal price?
the telecommunication companies to make

investments and establishing service price. In
The objective of this study is analyze the
other words, building nationwide network to
process, which was fully launched in 1995 and
provide full coverage of 2Mbps internet service
completed in 2005, of developing one of the
required substantial investment but there were
world
s most advanced high speed broadband
no prior cases of enforcing any projects in such
network infrastructure, as well as the
unproven difficult and costly venture to
achievements and their success factors of the
benchmark from. In addition, there were many
High Speed Broadband Network Infrastructure
who believed using the telephony modems or
Development Project.
the Integrated Services Digital Network (ISDN)
The Chapter of this study details the
was enough and thought investment to
analysis of IT infrastructure both in Korea and
changeover to Asymmetric Digital Subscriber
other nations during the

90s and the background
Line (ADSL) was unnecessary. The following
on why the High Speed Broadband Network
questions were asked during the planning phase
Infrastructure Development Project was
of the project to identify general awareness on
pursued. The Chapter includes analysis of the
the necessity of the high speed broadband
IT development per categorized cases of public
infrastructure. The questionnaire can be noted as
sector, schools, residential, and neglected regions.
an example of how difficult it is to establish a
Chapter then focused on identifying the
policy on advanced technologies and services
success factors and the achievements of Korea

s
that surpassed general understanding of the
broadband communication network development.
time.
In addition, the study also placed efforts to

obtain more to the truth information through
Do we really need x Megabyte speed? (we
utilization of interview contents2) of actual
can do everything we need through 56Kbps
individuals in charge of various parts of the
modems.)
project from various organizations including the
Are there contents even if x Megabyte
Ministry of Communication (MIC), the National
speed is realized? (there are no contents to
Information Society Agency (NIA), and
2) Referenced the interview contents of the History of Korea

s High Speed Broadband Network (2003), and History of Korea
s Nationwide High
Speed Broadband Network Project (2005).
<Figure 1> Implementation Policies and Achievements of IT Communication Network Infrastructure Development
telecommunication companies.
the project, 5 major network infrastructures of

government administration, finance, education &
. Domestic & International IT

Infrastructure Environment and
Establishment of Broadband
Communication Network
Development Plan
research, defense, and national security were

completed (refer to <Chart 1>). As a result,
infrastructure for inter-department network was
developed and in conjunction with the
infrastructure and network developments, basic
communication systems such as telephone
1. Domestic and International IT Infrastructure

Environment during Early
90s
service were developed to equal those of

advanced nations. In addition, through the SelfSufficient Information Technology Development
1) IT Development Environment in Korea
Project, Korea was able to obtain domestic
Since the
80s, Korea implemented the National
capability to develop, produce, and supply
Basic Information System Project to improve the
certain key technologies including the Time
efficiency of government organizations and to
Division Switching System (TDX3)) and the Tiger
foster IT industry through creation of new source
Computer (TICOM4)) Systems. (MIC, NIA, 2005a;
of demand. During the 1st Stage (1987~1991) of
MIC, NIA, 2003).
3) Time Division Switching System: Digital switching system developed in Korea.

4) Tiger Computer: Small and mid sized computer developed in Korea. Used primarily for government administrative network computer.

<Chart 1> Progress of IT Development from the

80s ~
90s
Individual government branchesinformatization efforts(~1977)
- Computerization of budgeting process by the Economy &
Planning Agency (1970)
- Computerization of telephony process by the Ministry of
Post & Telecommunication (1971)
- Computerization of work process by various government
agencies such as the Customs Agency and the Monopoly
Bureau (1973)
Framework Plan for Computerizing Administrative Process (1978~1986)
- Improve administrative service for mass public
- Create small but efficient government
- Framework Plan for Computerizing Administrative Process Phase 1 (1978)

- Computerization of motor vehicle registration and related
public service (1982)
- Computerization of driver
s license related administrative
process (1982)
- Computerization of Ministry of Foreign AffairsPassport
related administrative process (1983)
- Framework Plan for Computerizing Administrative Process Phase 2 (1983)
Framework Plan for the National Basic Information System - Phase 1 (1987~1991)
- Achieve information society equaling that of advanced
nations by first half of 21st Century.
- Complete the National Basic Information System by mid
90s
- Create small but efficient government
- Acquire and maintain national competitive edge by
achieving high productivity in the private sector
- Framework Plan for the Government Administrative Branch

Network (1987)
- Framework Plan for Education and Research Network (1988)
- Framework Plan for Finance Sector Network (1988)
- Framework Plan for National Defense Network (1988)
- Framework Plan for Research & Development Network
(1988)
- Comprehensive Measurements for Creating Information
Society (1990)
- Multi-Functional Office Equipment Distribution Plan (1986)
Framework Plan for the National Basic Information System - Phase 2 (1992~1996)
- Expand, upgrade, and establish stable operation of the
National Basic Information System
- Foster domestic IT industry
- Framework Plan for the Government Administrative Branch

Network - Phase 2 (1992)
- Framework Plan for Education and Research Network Phase 2 (1992)
- Framework Plan for Finance Sector Network - Phase 2 (1992)
- Framework Plan for National Defense Network - Phase 2
(1992)
- Framework Plan for Research & Development Network Phase 2 (1992)
* Source: MIC, NIA (2005a), History of Korea

s IT Development Policy
However, even though IT was recognized as
90s there were still various limitations and
Korea
s core industry for enhancing national
obstacles when compared to advanced nations.
competitiveness as the nation entered into the
First, although the 5 major information network

5
was completed, each government branches
measurement for the unavoidable opening of the
pursued IT development projects independently
IT market (MIC, NIA, 2003).
during the 2 nd Stage of the National Basic

Information System Project (1992~1996) so inter-
2) IT Development Environment in Major
department network in nationwide scale was not
Countries
established. In addition, even though the nation
After the
90s, a new wave of change, unlike
possessed self-development capability for certain
anything before, swept through the global
systems, Korea still fell far behind in core
economic environment as a result of innovative
technological capability in cutting-edge
development of information technology that lead
technologies such as high performing super
to creation of new industry and new culture of IT
computers, high speed IT devices and
usage. It became the turning point where the
infrastructural technologies, as well as ability to
world enters into the information age in which
utilize information technologies such as
the information technology is recognized as the
multimedia (MIC, NIA, 2005a; MIC, NIA, 2003).
core factor for a nation

s competitiveness.
Since the information technology was
Each of the advanced nations including USA,
developed centered on fixed-line telephone
Japan, and the nations of EU, started to compete
service, there lacked infrastructure for
in implementing diverse projects to construct
developing, storing, and transmitting data and
high speed broadband network to gain leading
multimedia contents. Furthermore, there was
edge in the global economy of the 21st Century.
insufficient data for to circulate due to
Development of high speed broadband
insufficient database of public information and
communication network to provide multimedia
even the IT development in industry and
services including e-news, e-magazines, movies,
commercial sector was at a standstill at an in-
games, home shopping, e-banking, and remote
house network only level. Particularly, with the
medical services via Fiber to the Office (FTTO)
commencement of the Uruguay Round, the
and Fiber to the Home (FTTH) network has
North American Free Trade Agreement
become recognized as a new form of social
(NAFTA), and the EU1992, globalization as
overhead capital that plays the role of growth
well as regional development were pursued
engine for the national economy in the global
simultaneously. As the demand for opening the
competition era.
IT market became stronger in international trade
First, USA launched the National Information
negotiations, it created a necessity to develop a
Infrastructure (NII) Project to gain a global
new strategy that can overcome the limitations of
leading edge in the 21st Century global economy
formerly established growth strategy. The
through evolution and innovation of information
government switched its policy in IT industry as
technology. The idea of NII is to build
competition first, open latermethod as a
Information Super Highway (ISH) by upgrading

the voice communication network to integrate
which the government assessed to become the
voice, video, and data transmission. This effort to
core industry in the future, Japan made efforts to
strengthen national competitiveness became an
have the leading control in the future global
important policy taken by both the government
economy (MIC, NIA, 2003).
and private sector. The focus of the ISH
Lastly, in case of EU, in order to regain the
development was not placed in laying a new
social and economic leading position, which
communication network but integrating the
have been overtaken by USA and Japan after the
existing telephone network to allow data
2nd World War, and to resurrect the old glory of
transmission and placed highest priority in
European culture, the Union have selected and
fostering IT industry and strengthening
pursued high speed communication network
competitiveness by achieving nationwide
development projects. In other words, EU has
network and opening the information and
established objective to build nations with sound
telecommunication market (MIC, NIA, 2003;
social welfare infrastructure by vitalizing the
USA, 1992).
multimedia information and telecommunication
Japan placed construction of high speed
services as a part of the investment plan in
broadband communication network as the mean
preparation for the future information society.
for building fostering infrastructure for the
Under such strategy, the nations of EU
nation
s industries. With the nation not being
commenced accelerated implementation of
able to identify effective investment path for the
constructing high speed communication network
vast capital and technologies accumulated since
lead by the government owned telecommunication
the
80s, which resulted in the standstill of the
companies and started governmental supports to
nation
s economic growth, Japan sought high
relative industries (MIC, NIA, 2003).
speed communication network development

project as the mean for vitalizing the retarding
industry, create new jobs and to breath new life
2. Overview of the Broadband Communication

Network Project
into the nation

s economy. At the time, the
Japanese government established the next
1) Project Background
generation communication network as the new
Korea has been implementing diverse IT
form of social overhead capital, differentiated
development projects such as the National Basic
from the existing social overhead capitals
Information System Project since the early

80s
including roads, harbor, and airports. To provide
and built 5 major integrated networks while
nationwide B-ISDN service, the government
acquiring domestic development capabilities
sought to build fiber optic network. In addition,
for digital switching system and small and
by simultaneously investing and acquiring
mid sized computers. With the information
competitive edge in fiber related industries,
technology being recognized as the core factor
for the national competitiveness as Korea entered
The Broadband Planning Division was
into the
90s, the country also needed to establish
established within the Ministry of Post and
new investment strategies in order to advance as
Telecommunication to conduct affairs associated
one of the leading nations in the knowledge
with building comprehensive strategies for the
based society of the 21st Century. In other words,
development of high speed communication
the necessity of new strategy for developing
network, method of obtaining necessary
high speed communication network which
resources per annual basis, and acquiring
will enhance the efficiency of the existing
technologies pertaining to the development and
infrastructure and acquire technological
operation of high speed communication
competitiveness
independent
network. The Broadband Planning Division
development capabilities in the information
had 6 sub-organizations of the Planning &
technology sector, the country was met with
Management Department, the National
a challenge and opportunity to implement
Information Network Planning Department,
Broadband Communication Network Project as a
Public Network Planning Department,
nationwide policy oriented project (MIC, 1995;
Technology Development Department, Network
MIC, 1997).
Operations Department, and Commercialization
through
Support Department with the members of each

2) Multi-Administrative Branch Implementation
department formed with ministerial officials
Organization
from the relative ministries including the
In May of 1994, High Speed Network
Ministry of Communication, the Ministry of
Development Commission chaired by the Prime
Finance and Economy, and the Ministry of
Minister and commissioners composed of
Commerce, Industry, and Energy, as well as
Ministers of 12 government ministries was
experts from public organizations such as ETRI
established. In addition, the Implementation
and NIA, and from private telecommunication
Committee, chaired by the Vice Minister of the
companies including Korea Telecom, DACOM,
Ministry of Economy Planning and Class 1
and SKT (refer to <Figure 2>).
public officials, was formed under the High
The Broadband Planning Division commenced
Speed Network Development Commission.
building comprehensive strategy for developing
Together with the Implementation Committee,
high speed communication network infrastructure
the commission also had under its management
since early part of 1994 and completed the blue
the High Speed Communication Network
print in 1995. In addition, until the organization
Development Planning Division (henceforth the
was enlarged and incorporated into the IT
Broadband Planning Division) as the working
Planning Division of MIC in June of 1996, the
group for building high speed communication
Broadband Planning Division was at the forefront
network infrastructure (MIC, 1995; MIC, 1997).
in leading the high speed communication

MPT(MIC)
Broadband Planning Div.
Advisory
Committee
- Director: Exec. Dir. of Information &

Communication Policy, MPT
- Assistant Director: Dir. of MPT
Planning &
Mgmt. Dept.
Nat
l Information
Network
Planning Dept.
Director: MEP
Public Network
Planning Dept.
Tech. Dev.
Dept.
Network Op.
Dept.
Commercialization
Support Dept.
Director: MPT
ETRI Director: ETRI
Director: KT
Director: MOCIE
Director: MPT
* Source: MIC, NIA, (2005a), History of Korea
<Figure 2> Implementation Organization of

the High Speed Communication Network Infrastructure Development Project
The Korean government sought to strengthen the
network development project.
national competitiveness through development

of such information highway and set forth the
3) Project Objective
The objective of High Speed Communication

Network Infrastructure Development Project
ultimate objective as enhancing the quality of life

for all citizens (refer to <Figure 3>).
was to build the information highway that can
Furthermore, the government sought to
transmit voice, data, by expanding the existing
acquire high value cutting edge technology
national communication infrastructure and
based on such high speed communication
prepare for the information society of the 21
st
network infrastructure. In addition, the
Century as well as to ensure rapid transmission
government also planned to improve the life
of converged multimedia information by 2015.
quality of citizens by making remote learning
Expand Communication
Network Infrastructure
Technology Development
and Industry Fostering
Promote Usage of
Telecommunication Services
<Figure 3> The 3 Objectives of the Project
Interview excerpt of Moon-Ki Choi (Executive

Director at ETRI at the time)
Lastly, the government seeks to create new jobs

and strengthen the nation
s competitiveness in
The high speed broadband network development

project is the successful result of diverse policies
including the information communication
infrastructure development, technology development,
and promotion of usage.
the international market through technological
Interview excerpt of Byong-Chang Kang (Senior

Executive Vice President of Samsung Electronics
at the time)
4) Develop High Speed Communication
It
s true that Samsung Electronics was not able to
achieve notable success with ATMs, which the company
has been developing since the early
90s. However, by
applying the ATM technologies in the IMT-2000
equipments, it now plays a significant role in the
mobile phone export sales. Most of the personnel
involved with the ACE64 digital switch development
were placed in the development of W-CDMA.
development and fostering of the relative

industry.
Network: Pilot Network, National Network,

and Public Network
The
development
of
high
speed
communication network was conducted in three

phases of the Pilot Network to for new
technology development and testing purposes,
the
National
Network
for
providing
communication services to government and

and remote medical service possible through
public sector, and the Public Network for
development of various application services and
providing communication services in the private
making the high speed communication service
sector and mass public (refer to <Figure 4>).
available to all. To achieve this, the government is
The high speed communication network was
planning to first, expand the communication
developed in initial pilot phase to meet the
network infrastructure with full nationwide
technology development environment and in
development of high speed broadband
line with Korea

s condition, which lacked
communication network by 2015. Second, the
technological facilities at the time. It then
government seeks to promote usage of
advanced to the development of high speed
communication services by providing general
national communication network for public
information and telecommunication services
sector lead by the government to reduce the
over such communication network infrastructure.
financial burden associated with R&D of new
Pilot High Speed

Network
- Verify new technology
development
- Provide research network
for high speed broadband
network
High Speed National

Network
Apply
- Apply new technology

- Provide telecommunication
service to public sectors
<Figure 4> Project Formation

10
High Speed National

Network
Expand
- Expand new technology

- Provide telecommunication
service to private sectors
(high speed internet
service)

high technologies. Then finally, the high speed
that have direct connection with the national
public network was integrated with the high
competitiveness. It is high speed and large
speed national network and allowed the
capacity basic network development project for
development of next generation network
connecting major and rural cities with fiber optic
technology, switching and base stations as well
cable network implemented in 3 stages. In all of
as handset devices, platform, and application
144 telecommunication serviced districts
services. In other words, the plan is to build
throughout Korea, the ATM switching nodes
advanced high speed national and high speed
were installed and networked to provide
public network and upgrade the nations high
nationwide coverage of high speed data service.
speed communication network that will play the
As a result, by 2005, over 32,000 national network
role of testing network, research network, and
using institutes including the central and district
the infrastructure network for advanced R&D
government branches, educational institutes,
environment and strengthening the national
R&D centers, medical centers, and other
competitiveness in the IT industry (refer to
public institutes, were able to receive diverse
<Chart 2>).
telecommunication services at low cost (refer to
The high speed national network was
<Chart 2>).
developed with public resource to provide low
The high speed public network is the national
cost communication network service to
basic information network that allows transmission
government agencies, district governments,
of high speed and large capacity data to provide
R&D centers, schools, and other public institutes
general high speed communication service to
<Chart 2> Details of High Speed Communication Network Infrastructure Project

Category
High Speed National Network
High Speed Public Network
Pilot Network
Utilizing Institutes
Government and
Public Institutes
Private Sector (Corporations and

Households)
Universities and
R&D Centers
Funded by
Government
Private Sector
Gov. and Private Sector
Objective
Build Backbone Network
Build Subscriber Network
Build Testing Network
Coverage
Nationwide 144
Telecommunication Serviced
Districts
Determined by private sector

with consideration to market
demand and economic feasibility
1st Stage
(1995 ~ 1997)
Basic Network in 80 districts
Upgrade metropolitan and satellite

districtstransmission network
Build 2.5Gbps Pilot Network

between Seoul-Daejeon
2nd Stage
(1998 ~ 2000)
Basic Network in 144 districts
Supply (30%) ADSL/CATV
Build GigaPop in R&D Center

Cluster Region
3rd Stage
(2001 ~ 2005)
Expand ATM switching network

and upgrade service
Provide up to 2 Mbps service per

individual user
Upgrade Pilot Network
* Source: 1st and 2nd Stage High Speed Communication Network Upgrade Implementation Plan (MIC)
11
corporations and residential buildings (refer to
of time.
The objective of Korea
s efforts in projects for
<Chart 2>).
advancing information and telecommunication
. High Speed Communication Network
infrastructure had the same significance as the
Development & Usage Promotion
expansion of network facilities possessed by the

telecommunication companies which were
1. Development of High Speed National

Network and Usage Promotion
conducting national network business. The

reason for such aforementioned friction was that
even though the expansion and upgrade of such
1) Initial Development Stage of the High Speed
privately held network is done with the support

of government funding, if such significant
National Network
network
service fee discount is granted, it will have
development project is a project for building
immediate impact in corporate earning structure.
The
high
speed
national
communication network that integrates all

government and public institutes in all parts of
2) Creation of Off-Set Deposit Policy
the country by 2005. Although the initial stage of
With consideration to the importance of
the high speed national network (1995~1997)
the project and difficulties faced by the
was launched and implemented without a flow,
telecommunication companies with regards to
there came frictions among the MIC, who was in
significant discount of service fee, the MIC and
charge of the project, NIA and telecommunication
NIA formed a resolving measurement based on
companies with regards to the distribution of
mutual understanding.
cost liability for fiber optics cable network,
The government agreed not to take ownership
network usage rights, and service fee pricing.
of the high speed network and the
The position of MIC and NIA was that since the
telecommunication companies agreed to provide
fiber network development cost is supported by
60% discount to the standard price to government
the government, the usage fee paid by the
and public institutes. In other words, the
government and public institutions shall be
financial support provided by the government to
approximately 10.20% of the standard rate.
the telecommunication companies for building
However, the telecommunication companies had
national network was off-set with the discount
to decide whether or not to pursue with the
provided by the telcos to government and public
project because by accepting such discount
institutions for the usage of the network.
demand, their revenue will be reduced by hefty
The Off-Set Policy had a divesture mechanism
80.90%. Such friction was fueled with additional
for the government in having return on the
issues of ownership of the national network and
investment where as the telcos had financial
the usage rights and lasted for a lengthy period
support as well as source of demand for the
12

Interview excerpt of Chae-Yeon Cho (former

Executive VP of DACOM)
There were criticisms within the company with

regards to this project. The worry was that although
there was clear revenue, the debt to government will
only accumulate in the end and there were also
concerns about unclear demand and business
expansion after the completion of network
development. However, after the year 2000, the high
speed national network project turned out to be the
most profitable business for DACOM. Even public or
government projects are bound to fail if it is not based
on profitability.
government and public institutes was

established and the framework for the usage of
high speed national network project was formed.
The Off-Set Deposit is government
s invest
first policy for the development of the
communication network and because it is
managed as a loan to telecommunication
companies that collected, the government was
able to provided subsidy to government and
public institutes using telecommunication
service. The policy managed the service fee
charged to the service using institutes (the service
service.
fee) and the actual price received (contracted

3) Establishment of Framework for High Speed
price) by the telecommunication companies
National Network Usage
separately. Actually, the price paid by the service
After 1995, the telecommunication service to
using institutes was set at lower price than the
government and public institutes was provided
contracted price and the difference of the service
through the high speed national network and at
fee and the contracted price was off-set from the
the time, the telcos only provided dedicated line
deposit provided in a form of investment for the
service and packet exchange service. As the Off-
construction of the national network by the
Set Pricing Policy was implemented in 1996,
government (refer to <Figure 5>).
telecommunication service price policy for
With such service fee structure, the
* Source: MIC (2005a), History of Korea

<Figure 5> Off-Set Pricing Policy for High Speed National Network
13
Government
Support
Private Sector
Investment
Expand
Infrastructure
Vitalization of
Telecommunication
Industry
Affordable
Pricing
Increased
Usage
Increased Profitability for Telcos and

Expansion of Informatization in Public Sector
<Figure 6> High Speed National Network Business Model Flow Chart
government was able to receive broadband
public institutes commenced providing
service for government and public institutes with
information to citizens via internet and after the
the same budget as they had implemented in
full implementation of internet website services
previous projects and it was significant since the
in 1997, the information service provisioning
pricing policy stimulated the distribution of
through high speed internet has advanced with
information as well as enhancement of
most of the government and public institutes
information and telecommunication system in
participating (refer to <Chart 4>).
the public sector.
In addition, the High Speed National

Network Project, implemented for 11 years from
4) Promoting Utilization of Information &
1995 to 2005, contributed greatly to the expansion
Telecommunication Technology in Public Sector
of usage of telecommunication network among
In 1996, majority of the government and public
the government and public institutes. The
institutes were able to use telecommunication
average usage bandwidth jumped 12 times from
service at cost of only 10.20% of the standard
0.4Mbps in 1998 to 4.9Mbps in 2005 (refer to
price. Through such low pricing policy, the usage
<Chart 5>). The High Speed National Network
of broadband telecommunication service was

stimulated and this resulted in increased
profitability of telecommunication companies
and its business model is as shown in <Figure 6>.
From 1996 to 1998, the affordable pricing
policy resulted in 17 fold increase of usage
demand for the telecommunication service by
the government and public institutes (refer to
<Chart 3>).
Starting from 1995, the government and
14
<Chart 3> Usage Demand by Public Sector and

the Market Size from 1996 to 1998
Year
1996
1997
1998
Usage
Demand
2,184 Lines
23,171 Lines
30,137 Lines
Market Size
6.6Billion
KRW
52.5Billion
KRW
113.2Billion
KRW
Annual
Growth Rate
795%
216%
Market
* Source: Usage Status of High Speed National Network Service (NIA

Internal Data)

<Chart 4> Government & Public InstitutesInternet

Website Service Launch Year
Year
2. Provisioning of High Speed Internet Service

to Schools
Government & Public Institute
1) Government Policy towards Schools
1995
The Prosecutor
s Office
1996
Ministry of Culture & Sports, Ministry of

Government Administration, Korea Tourism
Organization, Ministry of Government
Legislation, Ministry of Science & Technology,
National Statistics Office, Small and Mid Sized
Business Administration, Unification Office
(currently the Ministry of Unification), Ministry
of Finance and Economy
The government announcedFree Internet

Service Policy for Elementary, Junior High, and
High Schools to Achieve Early Completion of IT
Development in Schoolsin 2000 to allow free
usage of internet for all students, who are the
future of Korea. To achieve this, the government
Korea Railroad Corporation, Korea Intellectual

Property Office, Ministry of Construction &
Transportation, Korea Customs Service, Fair
Trade Commission, Ministry of Commerce,
Industry & Energy, Procurement Office,
Ministry of Labor, the National Assembly and
the Library of Congress, Ministry of Foreign
Affairs & Trade, Korea Forest Service
made basic internet education a mandatory
1998
Ministry of Patriots and Veterans Affairs,

Supreme Court of Korea
network usage in 2000). The policy established a
1999
Military Manpower Administration,

Korea Coast Guard
expansion of internet service to schools (MIC,
1997
subject in schools and provided dedicated line to

all schools free of charge, which at the time cost
1.462 million Korean Won per month for
256Kbps service (standard service fee for public
starting point for mass distribution and
NIA, 2003; Ministry of Education, Curriculum &
* Source: NIA (2007), White Paper - National IT Development
Academic Information Center, 2006).

Project not only contributed to the construction
of the National Basic Information System but
2) Provisioning of Free Internet Service to
played a leading role in stimulating greater
Elementary, Junior High, and High Schools
bandwidth usage of the telecommunication
In September of 2000, the government
network by the government and public
provided 256Kbps internet service to over 11,000
institutes.
elementary, junior high, and high schools at free

<Chart 5> Change Trend of Bandwidth Usage per Service
Year
(Unit: bps)
1998
1999
2000
2001
2002
2003
2004
2005
0.4M
0.5M
0.7M
0.99M
2.1M
2.5M
3.8M
4.9M
Total bandwidth for

internet service
843M
1,986M
4,368M
14,838M
21,771M
36,953M
64,665M
73,363M
Nationwide Network
Bandwidth
85M
290M
620M
775M
1.2G
1.8G
Nationwide Network
Bandwidth
3.2G
13.4G
15.7G
21.4G
48.7G
51.3G
Bandwidth
Average bandwidth
usage per institute
* Source: Usage Status of High Speed National Network Service (NIA Internal Data)
15
<Chart 6> Comparison of Internet Service Fee (monthly) for Elementary, Junior High, and High Schools
Year
Speed
2000
2002
2004
Standard Price (2004)
64Kbps
131,180 KRW
Free
Free
477,600 KRW
256Kbps
204,680 KRW
Free
Free
877,200 KRW
512Kbps
283,220 KRW
36,780 KRW
36,780 KRW
1,213,800 KRW
2Mbps
657,720 KRW
374,500 KRW
374,500 KRW
2,818,800 KRW
10Mbps
480,000 KRW
45Mbps
4,932,900 KRW
4,649,680 KRW
2,954,000 KRW
21,141,000 KRW
* Source: High Speed National Network Usage Agreement (NIA)
<Chart 7> Comparison of Internet Line Speed in Schools per Year

Year
2000
2002
2004
Below 512k
6,999 Lines
4,687 Lines
1,548 Lines
Below 2M
2,155 Lines
6,863 Lines
5,558 Lines
Below 45M
51 Lines
93 Lines
4,609 Lines
Above 45M
0 Lines
21 Lines
31 Lines
Total Bandwidth
18 Gbps
44 Gbps
95 Gbps
Average Bandwidth
1.9 Mbps
3.7 Mbps
8.0 Mbps
Increase Rate
244%
215%
Speed
* Source: Usage Status of High Speed National Network Service (NIA Internal Data)
of charge and provided 512Kbps and 2Mbps
provided to all the students and e-mailing was
services at an affordable price of approximately
used as a channel for communication and
20% of the standard rate (refer to <Chart 6>).
homework management between students and
As a result, the average bandwidth
teachers. Commencing in April of 2002, theEBS
consumption by elementary, junior high, and
College Entrance Exam Program, provided with
high schools increased significantly from
the support by the Ministry of Education, was
1.9Mbps in 2000 to 3.7Mbps in 2002, and then
serviced in classrooms and this became the basis
jumped to 8Mbps in 2004 (refer to <Chart 7>).
for schools e-Learning5) service infrastructure.

Currently, the e-Learning service in Korea has
3) Internet Service Usage by Elementary, Junior
expanded to provide educational services not
High, and High Schools
only for elementary and junior high school
Commencing in 2001, e-mail account was
education but programs for early childhood
5) NEIS is the Nationwide Education Administrative Information System that provides networked environment and provides education related
information via internet to elementary, junior high, and high schools throughout the country as well as district Departments of Education,
their sub-organizations, and the Ministry of Education and Human Resource.
16

education, special education as well as prodigy
receiving data. Since monthly rate for 2Mbps
education and its relative industry has also
service in the private sector was over millions of
grown in great deal. In addition, the Education
Won (4.69 million KRW/month in 1998), it was
Administration Information System, which
only being used by businesses. The demand in
integrates the network among the Ministry of
residential and personal market can only be
Education, Department of Education, and
considered possible only if the pricing obstacle
schools, contributed largely to the enhancement
can be resolved. In other words, the Public
of
Network Project faced dark outlook as a result of
transparency
in
education
related
administration process while satisfying the
low demand due to high price.
citizensright to know.
Interview excerpt of Il-Ran Kim (Chief Administrator

of the Ministry of Education at the time)
Process innovation through usage of high speed
national network.The Ministry has established the
National Education Information System (NEIS) by
networking the Ministry of Education with over 11,000
elementary, junior high, and high schools via high
speed national network. The NEIS allows HR
management, budgeting, accounting, and other major
administrative processes as well as faculty, enrollment,
transfer, and other in school processes to be conducted
online. (omitted) NEIS has supplemented the existing
system
s limited capabilities and is networked with
over 400 universities as well as with the high speed
national network (omitted). The system has not only
improved the transparency in the administrative
process of the education sector but has also contributed
greatly in satisfying the citizen
s right to know.
Interview excerpt of Hyun-Jae Park (Senior

Executive VP of Thrunet at the time)
Challenge into the New World.Many people had said
it
s highly difficult. When considering the cost of
equipments and installation, the loss will accumulate as
the number of subscriber increase. (omitted) I still get
the feeling of excitement when thinking back to the
time we launched the high speed internet service. How
can I put this, maybe Armstrong felt this way when he
first set foot on the moon?(omitted)
When considering the cost of building the

network to provide broadband service as well as
maintenance costs, providing high speed internet
service at around 30,000 KRW was impossible
from service operator
s perspective. In contrast,
from the user
s perspective, it was also impossible
to use broadband service if such service cost
hundreds of thousands or even millions of Won.
3. Provisioning of High Speed Internet Service

to Homes
In other words, there was significantly large gap

between the supply and demand sides.
To resolve such issue, the government
1) Difficulties for High Speed Internet Service
established the Cyber Korea 21 Strategy (1999)
during the Initial Stage
that included plans for completing the high
Until 1998, the usage demand and
speed network infrastructure and reducing high
infrastructure for broadband service in residence
speed internet service price to below 40,000 KRW
was very poor and it was basically at the level of
by 2002 in order to become IT Power Nation in
telephony modem service transmitting and
the 21st Century. To create new demand of the
17
high speed internet service, the governments
motivated to provide the service. The price of
plan was to first establish a pricing policy that is
about 40,000 per month was very attractive
acceptable to users and based on such policy,
pricing to the consumers. At the time, majority of
with anticipation that the demand will be created
the internet service in residences were accessed
and supply will follow through active
through telephony modems and there often were
competition among the service operators. The
news reports about absurd phone bills in the
model employed by the Korean government to
daily newspapers. However, the market
expand the usage of internet service is as shown
controlling telco in Korea had disagreeing
in <Figure 7>.
outlook on such low pricing of high speed
The price, which was assumed to be
internet service.
acceptable by the consumer, suggested by the

government was somewhat agreeable by the
telecommunication companies but when
compared to the enormous investment the
companies had to make first, it was believed to
be unfeasible business venture and as a result,
the high speed internet service had to be
postponed.
If internet service is delivered to
approximately 10 million households out of total
Interview excerpt of Sam-Young Seo (President of

NIA at the time)
(omitted) KT was very pessimistic even during the

initial period of launching ADSL. I believe it was
because KT had its own opinion and visions for the
internet service business.... No matter how good the
government feels an idea is and make it into a policy, if
the operators feel that it lacks profitability, they don
t
have to participate in the business. Therefore, in the
future policy making process, the government must
also take role in creating an environment in which the
operators will also willingly participate in the business.
(omitted)
of 14 million households in Korea at suggested

price, a new market with a size of 4 trillion KRW
will be created. The problem was how to get the
telecommunication companies to become self-
2) Competition in High Speed Internet Service

Business
Deregulation and Competition

Stimulating Policy
Government
Support
Private Sector
Investment
Expand
Infrastructure
Vitalization of
telecommunication
industry
Informatization Education and

PC Distribution Policy
Affordable
Service Fee
Increased
Demand
Increased corporate profitability & expansion

of informatization among mass public
<Figure 7> Model for High Speed Public Network (Internet Service)
18

1998 was the year in which the internet service
stage of the business launch was resulted in the
via HFC network (cable TV network) was
dissatisfaction among the consumers and created
commercialized and the ADSL technology was
misunderstanding to the service operators that
first introduced. In 1998, Thrunet became the first
the high speed internet service had no positive
service operator to provide high speed internet
outlook from business perspective.
service through HFC network at comparably
In addition, there was also a problem of not
affordable price of around 40,000 KRW. Then in
having the demand as much as anticipated. As a
1999, Hanaro Telecom came in with drastic and
measurement to such problem, the government
differentiated strategy and made significant
sought to establish various policies to provide
investments in ADSL to gain leading market
support the service operators including plans to
share, which lead to 400 thousand subscribers by
stimulate the demand, while getting them to
end of 1999. As the number of subscribers
actively promote marketing activities to acquire
increased, Korea Telecom, the nation

s largest
new subscribers and handling the complaints of
telco, also commenced providing high speed
the existing subscribers. Some of the supportive
internet service and full market competition
measures were policy for network maintenance
structure was formed.
within subscriber
s homes, financial support for
building subscriber network, and plans to
3) Expansion of High Speed Internet Service
During the initial stage of the high speed
stimulate the demand for high speed internet

service.
internet service, the investment was focused
To promote the usage of high speed internet
on obtaining leading market share in the
service, the government launched PC Distribution
competitive environment but the service
Project for Every Households as well as internet
operators were faced with profitability issues as
education programs for students, teachers,
well as customerscomplaints about service
housewives, and military personnel. In addition,
quality such as low speed. In the end, the early
policy for providing free internet service to all

elementary, junior high, and high schools was
Interview excerpt of Ik-Ho Seok (IT Development

Division Director of MIC at the time)
At the time when Information Highway Development

Project was launched, many people were askingSo we
need to build a highway? Wouldn
t it be useless if there
are no vehicles on the road?Even the media reported
similar voices and the question asked by the Board of
Audit and Inspection wasWhy are you making it so
huge?However, if the plan was not made in the large
scale at the time, how would we have handled the
explosive growth of the high speed internet service
demand from 1998 to 2000? (omitted)
also added and by end of 2000 all the schools

in Korea had free internet service. The strategy
was to expand the foundation for demand by
turning the schools, students, and teachers, who
are the main internet service users, as the source
of demand. With active promotion by the service
operators and governments strong and
determined support, the number of high speed
internet service subscribers started to increase
19
<Chart 8> Status of High Speed Internet Service Subscribers

Year
No. of Subscribers
No. of Subscribers
2000
2001
2002
2003
2004
2005
2006
2007.Q4
3.87 M
7.8 M
10.4 M
11.18 M
11.92 M
12.19 M
14.02 M
14.31 M
* Source: Status of High Speed Internet Service Subscribers (MIC (2007. 5)).
and in 2000, the total numbered at 4 million

households, which then increased to 7 million in
2001, and by the end of 2002, the total number of
internet service subscribers surpassed 10 million
(refer to <Chart 8>).
4) Choosing ADSL Technology
It was not an easy decision on choosing which

technology to use for setting up the subscriber
Interview excerpt of Jin-Deok Kim (Hanaro

Telecom
s Executive VP of Marketing at the time)
We compete with drastic and differentiated strategies.

I believed at the time that in order to increase the
market share, we needed to make drastic investments
and employ differentiated service. That
s why we laid
out fiber optic cables and launched ADSL service
together with local telephony service (omitted). We
competed with drastic and differentiated strategy
compared to other telcos and I feel that such measures
played an important role (omitted).
network. When considering only the

communication quality, ADSL was the most
in the world, a situation in which even when all
optimal but when considering the efficiency of
of the ADSL chips produced in the world were
investment, ISDN was more appropriate.
brought in, there would still be shortage, had
Hanaro Telecommunication Company, as the
occurred. The ADSL chip, which during the
late entry operator in the telecommunication
initial phase of the project cost over 800 thousand
industry, decided on drastic investment and
KRW, rapidly decreased to below 200 thousand
selected to provide differentiated service to
KRW and this resulted in economically
acquire subscribers and increase its market share.
competitive
environment
for
the
For the backbone infrastructure, the company

laid fiber optic cables and launched local and
long distance telephony service together with
ADSL based high speed internet service, and
contributed to mass distribution of high speed
internet service.
KT also made a turnaround from conservative
ISDN policy to ADSL based high speed internet
service, and commenced full launch of mass
distribution of high speed internet service.
With investment in the scale never before seen
20
Interview excerpt of Young-Han Song (Senior

Executive VP of KT at the time)
KT decided to deploy ADSL only after we realized

that the customer
s need was not just a simple internet
service but it was the high speed internet service.
(omitted) As the representative corporation of Korea, it
was not easy to just jump into the market since large
scale investment can have significant impact in
corporate bottom line. Being the late entry in the ADSL
market (omitted), KT focused on theMega Pass
strategy that emphasized in brand recognition and all
the company
s manpower was employed in the ADSL
marketing (omitted).

telecommunication companies since it directly
measurement became necessary to provide
reduced the cost per subscriber.
unbiased telecommunication service in all the

districts and regions.
4. Development of High Speed Network in

Rural & Lower Income Districts
2) Measurement to Eliminate Informatization

Gap
1) Gap in IT Infrastructure Development
When KT became privatized in 2000, the
As of end of 2005, all of the elementary, junior
government leviedDeclaration Pertaining to
high, and high schools throughout the country
Korea Telecom
s Guarantee in Providing Public
were connected with internet service. All of the
Service(No. 2002-4, Jan. 2002), as a condition of
major cities were connected via fiber optic cables
authorizing privatization, to ensure KT
and even small townships and villages (eups and
maintains its obligation to provide service for
myeons) were networked and provisioned with
public. In accordance to such declaration, Korea
internet service. However, rural and agricultural
Telecom constructed high speed communication
areas still were neglected and had poor
network in rural and agricultural districts.
communication network infrastructure. Because
In 2002, KT complied with such declaration
the telecommunication companies steered away
and completed the construction of high speed
from investing in building high speed network in
network in all townships and villages and key
these districts, a new problem of informatization
areas of the rural districts and in 2003, the
gap in the information society arose. Since this
company expanded its number of households
also became a factor for government

s efforts in
for high speed subscriber network to over 100
balanced economic development in all regions, a
homes. Then from 2004 to 2005, KT commenced
<Figure 8> Network Infrastructure Development Project in Agricultural Districts
21
construction of high speed network in rural and
speed network since it was difficult for private
agricultural towns with over 50 households and
companies to make such investment in the
expanded the high speed network to include
districts.
rural and agricultural regions throughout the

country.
By the end of 2005, 80 thousand households,

among those with high speed network not
As a result of such efforts, over 94% of
available, in the agricultural communities with
3.77 million, or 3.53 million households in
50 households of more were connected with via
agricultural regions were able to receive high
KT
s obligation to guarantee Public Service in
speed internet service by end of 2005 but there
June of 2006 but to the remaining homes in the
still remained 240 thousand homes that did
communities with less than 50 households, the
receive service. Since KT agreed to construct the
government decided to provide financial
network in small villages and townships with
support for the construction of high speed
over 50 households, it came to the point of
network. MIC, district government, and KT
requiring government investment for remaining
collectively formed a matching fund in the ratio
rural and agricultural districts with less than
of 1:1:2 and by 2006, any homes wanting high
50 households. Through theHigh Speed
speed internet service were provided with fixed
Communication Network Expansion Project
line, interactive satellite internet service. This
for Agricultural Districtslaunched in 2006 and
completed the construction of nationwide
2007, the remaining households were connected
networked environment for providing high
with high speed network and allowed
speed internet service in all parts of the country.
provisioning of high speed internet service in
The government plans to construct full
almost all the regions throughout the country
nationwide coverage environment by 2008, to
(refer to <Figure 8>).
ensure the availability of internet service by any

citizens at anywhere and at anytime.
3) Expansion of High Speed Network in

Agricultural Districts
With the expiration of KT

s obligation to
4) Financial Loan Support for Constructing High

Speed Communication Network
comply to Declaration of Guarantee of Public
Massive investments were required for
Service6) in 2005, a new measure was established
constructing high speed communication network
to the agricultural districts which did not have
in agricultural districts. However, since these
the high speed network infrastructure built yet.
communities had economic difficulties as well
To these districts, the government provided
as aging population, which equaled low number
financial support for the construction of high
of potential high speed internet users,
6) Korea Telecom
s obligation levied by the government (MIC) as a condition for authorizing privatization to ensure construction of high speed
network in agricultural districts and stable service in key telecommunication requirements of the country (Duration: 2002~2005).
22

<Chart 9> Comparison: ISDN vs. ADSL vs. CATV

Network
Type
Max Speed
Monthly Rate
Pros
ISDN
128Kbps
3 min /
40 KRW
- Simultaneous usage of telephone

and internet
- Favorable for short period users
- Must be geographical located close to

phone company
ADSL
8Mbps
Approx.
50,000 KRW
- Simultaneous usage of telephone

and internet
- Fixed rate and has no additional
charge
- Only available in certain districts

- Asymmetric Service
HFC
10Mbps
Approx.
40,000 KRW
- Fixed rate and has no additional

charge
- Only available in cable TV network

serviced districts
- Reduction of speed when many users are
online simultaneously in the same region
Cons
telecommunication companies steered away
from making such investments in such districts.

As a measurement, the government has
Interview excerpt of Chang-Gon Kim (former Vice

Minister of MIC)
(omitted) The real reason behind constructing high

speed communication network was to provide high
speed communication service environment in which
anyone can access the service at anywhere and at
anytime. (omitted) Because high speed internet service
is not a special service exclusive for elite few. Since
1999, the government has been implementing a loan
support policy in the amount of approximately 100
billion KRW annually, to ensure the service is provided
to rural and less populated regions and eliminate
informatization gap. In the near future, a full
nationwide coverage environment will become
available to provide high speed communication
network service anywhere throughout the country.
established a special loan budget since 1999 to

stimulate the operators to build high speed
communication network in the agricultural
regions by providing loans and contribute
towards eliminating the gap in informatization
(refer to <Chart 9>)
Through the loan project, the government
provided proportion of the capital required
to construct high speed network to the
telecommunication companies in a form of low
interest loan, which reduced the burden of heavy
network in the agricultural regions.
investment on the telcos and acted as a stimulant
Since the launch of the project until 2005,
for constructing high speed communication
total of 618 billion KRW was provided as a
<Chart 10> Financial Loan Provided for High Speed Network Development per Year
Year
1999
2000
2001
2002
2003
2004
2005
Budget
100 Billion
KRW
100 Billion
KRW
150 Billion
KRW
80 Billion
KRW
68 Billion
KRW
70 Billion
KRW
50 Billion
KRW
Districts
Metropolitan
Cities
Small and
Med Sized
Cities
Agricultural
Community
Agricultural
Community
Agricultural
Community
Agricultural
Community
Agricultural
Community
No. of Subscribers
* Source: NIA (2007), 2006.2007 White Paper - Elimination of Informatization Gap
23
loan support. As a result, 94% of the entire
informatization and to strengthen policies
agricultural districts throughout the countries
towards financial and taxation support for the
were connected with high speed network and
ICT industry by promoting informatization in
based on such infrastructure Korea was rated
public sectors, promoting investment towards
as world
s #1 high speed internet service
informatization from the private sector,
distribution country. The Loan Support Project
promoting demands for the electronics industry,
played a leading role in expanding Korea

s IT
and increasing investment towards research and
infrastructure throughout the country.
development by the government and private

institutes. This provided a firm basis and
. Success Factors and Outcome
revenue for implementation, and enabled a
Analysis
continuation of the High Speed Communication

Network Infrastructure Development Project.
1. Success Factor
2) Promoting Private Sector Participation through
1) Establishing a Systematic Implementation
Government Lead Investments
By inviting nationwide telecommunication
System
and
service operators such as KT and LG DACOM to
Communication Technology (MICT) was found
take part in the High Speed Communication
on December 1994 to promote the importance of
Network Infrastructure Development Project, the
Information and Communication Technology
government was able to lighten its burden on
(ICT)7), and to establish a high speed internet
investment towards high speed communication
network with the rise of the ICT era. The
network from a national aspect. These telcos
founding of MICT has enabled the establishment
contributed to create and expand demands by
of a systematic implementation system to
providing high speed internet services for free or
advance Koreas ICT industry to match that of
at a reduced price to non-profit organizations,
developed countries based on analysis on the
such as the government and public institutes,
status of informatization of the society and ICT
and schools.
The
Ministry
of
Information
industry. It also served as an opportunity to
Promoting the establishment of high speed
integrate and regulate ICT policies that had been
communication network with initial investment
scattered over different departments.
capital provided by the government and making
MICT enacted the Framework Act on
sharp reductions in utility fee using the Off-
Promotion of IT Development in 1995 to promote
Set Deposit fund served as an opportunity to
small and mid sized businesses oriented
secure the infrastructure necessary for the High
7) Information and Communication Technology (ICT): a technology field that promotes a foundation for a high-level new-society that combines
electronic communication and computers.
24

Speed Communication Network Infrastructure
investments to hold a dominant position in a
Development Project and to promote
facilities competition. They also carried out
informatization in the public sector in a short
offensive marketing strategies to retrieve the
period of time.
investments they had made in facilities.
The government introduced the Loan
Unlike other telecommunication services, such
Support Policy for Constructing High Speed
as fixed-line voice communication and mobile
Public Network Developmentand provided
phone service, high-speed internet is categorized
low-interest loans to service operators for an
as a secondary telecommunication service. It
early establishment of the high-speed internet
introduced a self-imposed competitive system
service market. In early 1999, the entire nation
instead of pricing regulation and an affordable
received support from the government so as to
service price based on fixed rate policy, allowing
maximize the ripple effect of the industry.
users to access high-speed internet without much
However, after 2000, the loan policy was limited
burden. The government proposed to establish a
to middle and small-sized cities, and fishing
guideline for a minimum service fee and opened
and agrarian regions to promote balanced
its market without regulating entry and pricing.
informatization and narrow information gaps.
And so, a low-cost service pricing system was
Since KT, Korea

s biggest fixed line operator,
established and the high-speed internet market
became privatized following the amendment
was able to advance within a short period of
of the Dissolution Order of the Korea
time.
Telecommunication Act,the government made
Last is the differential service from self-
it mandatory to establish high speed
imposed competition between telecommunication
communication network in rural and agricultural
companies. The service operators KT and
regions, contributing greatly to narrow regional
Hanaro Telecom strived to provide various
gaps
different products, reflecting the environmental

characteristics of its users, so as to dominate the
3) Creation of Free Competitive Market
market. High-speed internet service products,
Environment for Fixed Line Operators
such as Mega Pass from KT and Hanafos from
Most countries introduce the Local Loop
Hanaro Telecom, are provided according to
Unbundling (LLU) 8) policy when they first
transmission speed. By providing a self-imposed
establish the market. However, Korea introduced
environment for nationwide telecommunication
a telecommunication equipment competition
service operator, the government stimulated
policy in the beginning and the LLU policy in
telcos to diversify their services and to reduce
2001. As a result, the telcos made active
their price so as to promote the usage of high
8) Local Loop Unbundling (LLU ): a policy that allows nationwide telecommunication service operator to provide local phones and/or highspeed internet services by using the subscribersline. It is a media to open the dominant communication network of communication
companies with a goal to promote free competition to establish an internet infrastructure.
25
speed communication network.
Starcraft became popular in the 1990s, promoting

an increase in the internet cafes. Such increasing
4) Cultural and Environmental Factors
number of internet cafes contributed greatly to
The geographical and cultural characteristics
allow more Koreans to access the internet. It was
of Korea have contributed greatly to the
also an important opportunity in advancing the
development of high speed communication
establishment of information network.
network. High speed internet rapidly increased

because 1) most of the Korean population lives in
5) Creating Demands through Informatization
cities with high density, and 2) 48% of Koreans
The national informatization policy, promoted
live in apartments with large-complexes. Because
in parallel with the establishment of the high
some 90% of the residential districts are located
speed communication network project, is
within a 4km radius of KT

s telephone office,
important because it promoted demands
there are almost no limits in distance to establish
through informatization. Without a rapid
subscriber network, allowing Korea to improve
increase in demands, high speed communication
its home pass rate.
network infrastructure development by the
Also, because most Koreans respond rapidly

to new technologies and services, they prefer to
telecommunication companies would have been

delayed.
use new technology more than others. With an
The government implemented the1 Million
increase in dial-up services and problems
Informatization Education Projectto promote
occurring because of it, users were glad to see the
the information usage capability of its citizens.
introduction of high-speed internet services. The
For example, the1 Million Housewives Internet
maximum download speed for dial-up is 64Kbps
Education Projectlaunched by the MICT
while that of ADSL is 8Mbps and 10Mpbs for
provided internet education to housewives, as
cable modem. This enabled users, who were

dissatisfied at the speed of dial-up services, to
experience a great improvement in speed. And
the improvement in speed promoted users to
switch from modems to high-speed internet
services.
Internet cafes, first introduced in 1994 and
currently services by 24,000 agencies played a big
role in promoting the introduction of high-speed
internet. As more people were provided with
opportunities to freely access the internet outside
homes, strategy simulation games such as
26
Interview excerpt of Byong-Yeup Ahn (former

Minister of MIC)
(Omitted) The government promoted different

projects to utilize a complete high speed
communication network infrastructure. We strived to
promote usage of public network through housing
projects, promoted demand by promoting the use of
internet among students by introducing the internet
expansion in schools project, and provided internet
education to housewives. The PC distribution project
lowered the price of PCs, making an opportunity to
generalize PCs. And by establishing a competition
among telecommunication companies, the government
was able to provide high-speed internet service at a low
price.

well as those in neglected communities with
32,000 organizations). The communication
poor access to in such informatization education
expenses for national and public offices were
program in order to promote internet in citizens reduced by KRW 3 trillion from 1996 to 2005 due
everyday life.
to the high speed national network project,
The e-government service, provided since late
contributing to the expansion of demand in the
2002, was promoted visions to provide optimum
informatization of the public sector (NIA, 2004).
service to its citizens and to provide optimum
By realizing an e-government based on the high
environment for corporate activities by realizing
speed communication network infrastructure,
a government that maximizes productivity and
the government was able to improve its service
transparency and by establishing an internet-
to the citizens, and to promote efficiency and
based e-government integrated service window,
transparency in transactions between the
based on a safe and reliable information
government and corporations. The national
distribution environment. By promoting 11 core
and public offices themselves have been able
projects such as promoting citizen and corporate
to improve their efficiencies by promoting
services, promoting administrational productivity,
electronic approvals and the use of electronic
and establishing a basis for the e-government so
documents. Establishing information and
as to realize the vision of the e-government,
communication infrastructure enabled an
citizens were relieved from the burden of having
innovative improvement in public processes for
to visit public offices to submit paper work to
citizens and corporations, allowing many citizens
settle civil appeals and were provided with civil
to settle their civil and administrational work at
services whenever and wherever needed.
home.
Also, the establishing of a high speed national
2. Outcome Analysis
network producing KRW 1.53 trillion in the effect

on production inducement, KRW 440 billion in
Outcomes of high speed communication
the effect on value added inducement, and KRW
network project will be analyzed in 3 sectors -
1.97 trillion in the effect on employment
public sector, commercial sector and personal
inducement, contributing to the informatization
sector.
of the national community as well as industrial
The most important outcome in the public
promotion (NIA, 2004).
sector is the informatization of national and
The most important outcome in the industrial
public offices. When compared to 1996, when the
sector would be that corporations were able to
project was first introduced, in 2005 the
create a foundation for corporate informatization,
bandwidth usage of the public sector increased
the core of corporate competitiveness, by
158 times (1Gpbs to 158Gbps) and the number of
optimizing its management and operation
organizations 19 times (1,683 organizations to
through integrating business processes based
27
on high speed communication network
level of individuals. The quality of peoples lives
infrastructure. This allowed for the establishment
was improved due to the change in life style
of various new businesses, not seen in traditional
from the use of different online contents, cyber
businesses, such as online financial services,
trading, internet banking and electronic
internet broadcastings, internet games, and
administrations services.
electronic commerce.
Such changes provided opportunities for
. Conclusion and Suggestion
corporations that have been facing difficulties in

producing profits from traditional business
Korea became the world leading high-speed
models to convert to online-based business
internet country in 3-4 years between 1999 and
models. It also contributed to rapidly
2001. And Koreans are experiencing a new life in
emphasizing the importance of the domestic
the cyber space, changing their entire life style,
telecommunication industry, based on the word-
from their social and economic life to their
renowned high speed communication network
cultural life.
infrastructure, allowing the industry to surface as

the core growth engine of the national economy.
As afore mentioned, the high-speed

information and communication infrastructure
Also, the continuous investment towards high
of Korea was established from trust among the
speed communication network infrastructure
telecommunication companies, research
from the government contributed directly to
institutes and users, according to the strong will
promoting the telecommunication equipment
of the government and their consistent policies.
and facility industry. The continuous investment
The most important factor for success is the
gave birth to small and middle sized equipment
consistent promotion and support of
and service companies, becoming a catalyst
government towards its policies, and the strong
promote the industrial market that had been
leadership of the government. The government
facing stagnation. This became a base to promote
continued to support the growth of usage of
the development of the telecommunication
telecommunication network by government
service while advancing the IT development of
and public institutes and the facilities of
the industry.
telecommunication companies, provided internet
The most important outcome in the personal
to schools for free, implemented appropriately
sector is that the speed of the communication
timed investment and created demand through
circuit improved following the establishing of a
reverse order structure of demand and supply of
high-speed information and communication
users and telecommunication companies.
network, promoting the use of various contents
The government also provided an environment
such as email, chatting, internet shopping, and
where all citizens can access the internet by
web surfing, and improving the informatization
inducing telecommunication companies to
28

voluntarily investment in regions where they
important in establishing the key infrastructures
avoided because of economic reasons by
for future national developments. In the long-
establishing a systematic basis to narrow
term, the intervention of government is
information gap. The government was able to
necessary in the beginning for key projects where
generalize high-speed internet by providing
citizens and service operators can all profit from.
islands and remote regions opportunities to
The High Speed Communication Network
access high-speed internet.
Infrastructure Development Project will be a key
The High Speed Communication Network
example when promoting similar future projects.
Infrastructure Project and the High Speed
The high speed internet service market in
National Network Development Project of Korea
Korea has now reached saturated point. The
are well known projects in other countries.
nations leading position in the world is now
However, if these two projects are only interpreted
being caught up rapidly by Japan, who has
with focus on equipment development and
implemented FTTH service from the onset of
construction of communication network, then
high speed internet service deployment, and
such interpretation will have an erroneous
other late entry nations (Korea Economy Daily,
outcome. Although the nationwide construction
2007). The future IT development policy of
of the fiber optic cable and transmission as well
Korea must be pursued in a path that can
as switching network contributed greatly to the
maintain world
s leading position through the
development of Korea
s IT infrastructure, having
development of next generation infrastructure to
achieved great success in nations social
stimulate real-time multimedia based service and
informatization by promoting demands from
in line with the ubiquitous generation. To achieve
national and public offices is a more important
this, the authors of this study would like to
achievement. This is because promoting use and
propose the following: promote early completion
demands of nation
s social informatization is
of Broad Convergence Network (BcN)9); expand
more difficult than supporting the establishment
FTTH network; vitalize interactive multimedia
of facilities.
services such as Internet Protocol Television
Telecommunication Companies in any
(IPTV); expand BcN infrastructure in rural and
country are sensitive to pricing and usage
less populated regions; provide support for
demand as this is directly linked to their profit. It
utilization of next generation communication
is very difficult to expand usage demand by
network by government and public sectors; and
inducing service operators to voluntarily lower
implement provisioning of Giga-Internet service.
their pricing and provide service at a low price.
Finally, there is a necessity for in-depth
This is why the role of the government is
research on IT infrastructure, which is the core
9) Broadband Convergence Network (BcN): Next generation network that converges telecommunication, broadcasting and internet services in
high capacity broadband to provide quality guaranteed seamless service anywhere, and at anytime (MIC 2006b).
29
factor for developing future ubiquitous society.

The existing communication network is mostly
human interface oriented subscriber network. In
other words, it is constructed for primary usage
by personal computers, telephones, or other
telecommunication devices directly used by
human. However, the future infrastructure will
require machine-to-machine communication.
The u-City 10) and other urban information
system, the Radio Frequency Identification
(RFID), Ubiquitous Sensor Networks (USN), and
other next generation oriented technologies
which are actively being deployed are, in many
cases, developed primarily focused on
transportation, environment, safety, disaster
prevention, and logistics sectors. Therefore, there
must be sufficient discussion and research for the
designing of national infrastructure to respond to
corresponding demands and for early completion
of such foundation.
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D. C. Sicker, J. Mindel (2002).R Definements on a

Layered Model for Telecommunications
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31

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Informatization Policy

Analytic Study on Korea

Policy of upgrading the analysis of Korea

Index (ITU) for three consecutive years, and 1st in

terms of the high-speed broadband penetration

Having achieved high global recognition in a

rate (OECD), Korea is now enviously recognized

number of international IT indexes, such as

as the foremost Digital Power Nation

ranking 3 in the National Informationization

throughout the world. Many countries are

Index (NIA) in 2007, 1 in the Digital Opportunity

understandably interested in the factors behind

such success, as well as in the developmental

advanced nations focused their national

attention on building high speed broadband

telecommunication infrastructure. Notably, some

infrastructure for economic growth in the

including the OECD and the ITU have even

information age. Korea was no exception.

recommended their member nations to

Commencing from the mid90s, in line with the

global trend such as the National Information

model with regard to high-speed broadband

Infrastructure (NII) of USA, Korea established

the High Speed Broadband Network

During the early 1980s, Korea

Infrastructure Development Plan in 1994 and

was centered mainly on the installation of

from 2005, Korea implemented the plan in three

computers by individual government branches

stages of developing and upgrading the

and on the development of databases for their

broadband network in order to become the IT

affiliated agencies, but since the mid 1980s, the

Power Nation. As a result, by 2001, Korea

database functionalities have advanced to

completed fiber optic network connecting not

become the foundation for the project to build

only the major cities but small and mid sized

the national basic information system. In 1986,

cities and communities as well and created high

theAct on the Expansion and the Promotion of

speed broadband networked environment in

the Use of Computer Networkswas enacted to

which anyone can enjoy high speed multimedia

establish a legal basis for the development of the

internet service wherever, and whenever (MIC,

national basic information system. Then, in 1987,

in a drive to enhance efficiency in the public

Currently, there are over 14 million high speed

sector and establish a firm basis for the growth of

broadband subscribers in Korea with household

the IT industry, the government launched the

penetration rate surpassing 90% (NIA, 2007).

National Basic Information System Project to

Commencing in 2002, efforts was launched to

build a network connecting the five government

build digital academic infrastructure with

sectors of administration, finance, education and

projects such as e-Learning1), which connected all

research, defense, and public security, and set

of the elementary, junior high, and high schools