Internet protocol television or IPTV has long been touted as the future of television entertainment and a new growth engine of the industry.
The three firms licensed to provide IPTV services -- KT Corp., LG Dacom Corp. and SK Broadband -- are making extensive investments in the new business.
KT, the country's largest fixed line operator, plans to invest 1.2 trillion won ($892 billion) by 2010, while LG Dacom Corp. and SK Broadband plan on injecting 916.9 billion won and 1.6 trillion won, respectively, into the IPTV business over the next five years.
After a few false starts due to IPTV service providers failing to agree with KBS, MBC and SBS over the right to retransmit their programs, KT began providing programs from all three stations on its IPTV service Mega TV on Nov. 17.
LG Dacom's myLGtv and SK Broadband's Broad & TV soon followed, securing national retransmission rights to KBS and MBC programs and for SBS programs in Seoul and the surrounding regions.
A family watches television on KT`s IPTV service Mega TV. [KT Corp.]
However, as the two companies have not yet secured retransmission rights to programs produced by private provincial stations, SBS programs are not yet available for Broad & TV and myLGtv subscribers outside of Seoul and surrounding regions.
With all three IPTV service providers gaining at least partial access to terrestrial broadcasters' programs, commercial services with real-time broadcasts began on Jan. 1.
In addition to providing on-demand programming, IPTV has the potential to overhaul the country's advertising market.
Unlike conventional television, IPTV is capable of conveying information both to and from the viewer, allowing service providers to accurately monitor each viewer's preferences. This ability enables targeted advertising by airing adverts for products that share a common theme with the program being watched.
In addition, IPTV has the potential to give viewers access to internet banking and other services that are currently unavailable through conventional television.
However, some people are concerned that the Korean market will be difficult for IPTV to penetrate. Skeptics say that markets with wide high-speed internet distribution and high pay-television subscription rates are the most difficult for IPTV to penetrate. Korea has both these things. High-speed internet access is widely available across the country and the subscription rate of cable and other pay television services is around 80 percent.
Although IPTV's popularity is yet to be tested and the Korean business environment is potentially hostile, IPTV companies estimate that Korea will have between 5 million to 7 million IPTV subscribers by 2012. Local analysts say that target is realistic.
Hyundai Securities Co'.s telecommunications senior analyst Lee Shi-hoon says that, depending on the content and provider, a firm would need about 2 million subscribers for IPTV to become profitable. He said that 50 percent penetration rate by 2012 was possible.
With Korean IPTV service providers' target of an equal share of the 5 million to 7 million projected subscribers, breaking even may be easier for IPTV providers in Korea than it has been for firms operating abroad.
In Hong Kong, the region with the world's highest IPTV penetration, the largest provider is PCCW. According to a report published by U.S.-based consulting firm Frost and Sullivan PCCW is unlikely to see a return on its Hong Kong investment for another three to four years, more than seven years since it began related services in 2003.
By Choi He-suk