Thursday, May 3, 2001

Korea's BtoCE Opportunity Will Remain Robust

As South Korea continues to rebound from the 1997 economic crisis, its recovery is widely manifested in its citizens, who have once again become active consumers in both domestic and international markets. This metamorphosis, combined with a superior infrastructure, increased Internet access, and better online security–related issues, makes Korea's business-to-consumer e-commerce (BtoCE) space very attractive.

The Chaebol, always an important factor in Korean business, are investing significant amounts of time and resources into e-commerce undertakings to preserve their supremacy in the online environment. However, in many instances, they lack the experience of their American counterparts, are aware of the need for expertise from more experienced operators, and are actively seeking foreign partners or investors.

According to Aditya Puri, an analyst with the Yankee Group's Internet Strategies Asia-Pacific research and consulting practice, "Despite the real opportunity for success, few foreign companies have entered the market. Interestingly, the extreme nationalism that is often associated with Korean buying habits has not migrated (to the same extent) to the Internet."

The Yankee Group, in conjunction with Technowledge Asia, has recently concluded an in-depth survey that analyzes the profile and online behavior of users.

Key findings include:

- 35% of the survey respondents make online purchases on a quarterly basis;

- 65% of the online shoppers fall between the ages of 16 and 25;

- 45% of the respondents surveyed indicated that the most popular items purchased online are music CDs and tapes; and

- 43% of the sample shop online primarily for the convenience aspect—specifically, the logistics and delivery.

The Report also provides an overview of the existing economic climate, the current state of the Internet, and applicable regulatory aspects.

Broadband Access: Down Under
In common with most developed nations, Australia and New Zealand jumped onto the broadband bandwagon in the early 1990s. Progressive liberalization of telecommunications markets, government funding, and incentive programs have targeted affordable access to high-speed Internet services for all. The Yankee Group's recently published Report "Australasian Broadband Access, Part 1: Positioning the Technologies" takes stock of the situation "down under," with essential coverage of the current regulatory scene and positioning of the broadband technologies that fit the local environment and how they're being used.

In this first Report of a series on Broadband Access in Australia and New Zealand, the Yankee Group covers the essential status and trends for the technologies being exploited in this rapidly developing market. According to Geoff Letts, Research Director for the Yankee Group's Australasian Market Strategies research and consulting practice, "Incumbent carriers are fast redeveloping their access networks and new players are entering the liberalized marketplace with new technology and service concepts—both fighting to position for and exploit the broadband future. How do the various access technologies stack up to provide the all-important access services? Some of them are well entrenched, and some are seeing early vendor implementations, experimentation, and limited rollouts."

This Report draws on the profiles we maintain for industry players and their equipment suppliers. Key conclusions and positioning of the technologies includes:

- Untapped Cable. Many parts of Australasia are not served by HFC cable—not only regional and rural districts but also suburban areas. Pay TV delivery, local loop bypass, broadband Internet will combine to make community cable rollouts more common.

- Radio Rules. Following primary spectrum auctions in Australia, the industry can now rebalance supply and demand of radio spectrum through secondary trading provisions in the licensing. MMDS mainly carries pay TV, and mostly in rural Australia. There is plenty of scope for service development without massive infrastructure spend.

- The Unbundled Local Loop. ADSL is the single most influential technology for broadband services to the home. The Yankee Group anticipates it could be another one or two years before the regulatory, technical, and commercial arrangements associated with unbundling of Telstra's local loop will allow competitive provisioning of ADSL services.

- User Experimentation. Many broadband users are experimenting—whether it be gaming, interactive sessions, or surfing. They are fickle and a little destructive. The underlying Internet environment still has the character of the Wild West: play hard and get your kicks for free. The evolution of the average user, and inevitable economies of scale, will reduce the massive variety of traffic flows and per user destinations on the Web.

In the series to follow Australian Market Strategies will review the suppliers and their strategies in detail, and analyze the market from a bottom up or demand perspective.