According to the report of a market survey institution IDC the domestic Internet phone market, which was 157 billion won (US$171 million) in 2005, will reach at 968.9 billion won (US$1.05 billion) in 2009, making the average annual growth of 54%. In addition, the market of Internet phone equipment, which was 106.4 billion won (US$115.7 million) in 2005, will reach at 263.5 billion won (US$286.6 million) in 2009.
Internet phones were expected to grow to the full, taking the opportunity of connected line allocation through an 070 identification number in 2005, but now the reality does not meet with the expectation. According to the Korea Information Society Development Institute (KISDI), the number of subscribers using 070 was 110,000 as of September 2006, which is very small compared with 20 million wire telephone subscribers. Especially, the fact that 73% of the 070 subscribers are corporations tells that the Internet phone is far away from popularization.
In the past, the number of Internet phone operators was over 300, but now only about 10 operators remain, which shows the current market situation well. In relation to the reasons why Internet phone couldn't be activated, professionals analyze that Internet phones compared with wire phones, couldn't offer consumers any other differentiated value than a low rate.
Han Seung-jin, chief researcher of LG Economic Research Institute, pointed out: "The current Internet phone is just a substitution of the existing wire phone in terms of its functions. That is, it does not provide any other additional function." He also analyzed: "It is not easy to attract the existing wire phone subscribers to Internet phones, except for corporations who want to reduce operating expenses or individuals who frequently use long distance calls."
Ha Ki-seok, a chief researcher of Korea IDC, said: "In the meantime, the Internet phone rate didn't appeal to consumers, which is one of the reasons why Internet phones could not be activated so far."
Activation of Internet phones expected
Recently, through the roadmap of communication service regulations, the government is promoting competition among communication services and is working on the formulation of a horizontal regulation system that increases users' profits.
Especially if KT, which takes 92% of the local phone market share, can induce all of its wire phone subscribers to Internet phones, its ripple effect will be quite big, professionals analyze. However, some think that activation of the market can't be made by the number portability system only. The report of KISDI analyzed that Internet phones would have to offer additional applied services including video calling, an integrated rate covering local and long distance calls, and a low international phone rate using the features of the Internet if it wanted to attract subscribers.
It was also insisted that a cheap bundle product covering Internet phones and high-speed Internet could be offered to attract consumers. A person concerned with KISDI said: "The number portability system seeks after smooth subscription transfer by reducing users' expense spent on the transfer so only in the event that sufficient inducement for subscription transfer is offered to users, the goal of the number portability system can be attained." As the Internet phone market is agitated, WiFi phones are getting people's attention. Actually, some companies consider changing their wired business phones to WiFi phone.
Samsung Electronics, which will reside in a new building of Samsung Town located at Seocho-dong, Seocho-gu, Seoul around May next year, plans to construct a WiFi system. In addition to WiFi phones for business, the interest in home WiFi phones is going up.
Competition among WiFi companies
Unlike wired Internet phones, WiFi phones are available without turning on a PC, and compared with general local calls its rate is low and it is simple to use. Within the range that wireless Internet is available, a user can freely move while talking on the phone.
WiFi phone requires an additional expense of installing wireless Internet access points (AP) but compared with existing software phones it has greater strength. LG Dacom plans to advance into the home Internet phone market within this month, escaping from the existing sales strategy focused on companies.
Its subsidiary, LG Powercom, will introduce a new product to its 1.3 million high-speed Internet subscribers.
SK Telink announced to start SMS for Internet phones from this month. From July this year, the company intends to start the service of international SMS through Internet phone and of SMS to other Internet phone operators. In addition, it will release a business solution, Unified Communication (UC) in which Internet phones, messenger, groupware, schedule management and cooperative work are integrated, through which it will attack the Internet phone market.
Hong, Seong-gyun, Managing Director of SK Telink, said: "The Internet phone of SK Telink offers over 70 additional services, such as call forwarding, simultaneous call receiving, multi-numbers, caller identification presentation, ARS, etc. Starting the SMS service means starting the compatible service between mobile phones and Internet phones, and further it indicates a starting point of wire and wireless connection." He added: "We will make the best use of our strengths and launch a service of interoperable Internet video phones and mobile video phones through which we will strengthen a wire and wirelessconnected solution."
