South Koreans Want Their M-TV!

(page 2 of 2)

No one questions that free service helped accelerate the spread. "But I don't think low-priced monthly fees or a one-off initial charge would have made that much difference," says Eom Min Hyung, DMB project leader at KBS, or Korea Broadcasting System, one of the six terrestrial operators, each of which has piled up an accumulated loss of between $22 million and $33 million. "An initial charge of a few dollars would have speeded up network development, which will serve users better," he says.

Massive Investments Are Still Required

Sure. commuters in Seoul can watch TV news in the subway on their way to work, thanks to so-called gap fillers that relay signals underground. But that's because of a deal struck among broadcasters, mobile-phone operators, and cell-phone manufacturers. Agents for the mobile carriers agreed to collect an additional $3.30 from each buyer of a phone-TV combo to finance the building of a subway network for TV signals. Broadcastsers, in return, agreed to carry ads for phone manufacturers—and they want a similar arrangement for further infrastructure projects.

Government officials point out mobile TV is a nascent industry requiring massive initial investment, and new entrants would have to endure losses for the first few years. Industry executives argue that the investment requirement is exactly why service fees are necessary, at least until they develop sufficient economies of scale to attract advertising. They add that the fees should be affordable to avoid turning off consumers. The six terrestrial DMB operators together pulled in only $1.8 billion through advertising last year.

Perhaps most important is the need for cooperation between mobile-phone companies and broadcasters. As the bulk of mobile TV viewers are expected to be handset users, broadcasters need marketing help from carriers who fear TV programming could cannibalize on their video business that they hoped would increase traffic over telecom networks. "What's essential is to find a formula to share profits," says Eom at KBS.

To kick-start the alliance, Korean broadcasters relied on smaller carriers who used mobile TV as an incentive to get SK subscribers to defect. SK, with over half the market share, later cooperated with broadcasters as well. Eom cites services requiring two-way traffic, such as video-on-demand and mobile-TV shopping, as a win-win solution.

Despite early hardship, broadcasters remain confident they could eventually build profitable businesses from TV on the go. KBS says its recent traffic and travel information service offering such data as congestion spots, travel time, and parking availability to drivers is turning out to be a profitable project. ETRI expects the number of Korean mobile TV users to rise to 24 million, or half the population, by 2010, when the service will generate $3.2 billion worth of production in handsets and other equipment. "I think mobile TV will serve as a new growth engine," says ETRI senior researcher Byun Sang Kyu.

For more on mobile TV in Asia, visit BusinessWeek's slide show.

Moon is BusinessWeek's Seoul bureau chief.