Mobile Convergence: Transformer of Life and Industry

Reference: http://www.koreatimes.co.kr/www/news/biz/2008/06/123_25951.html

Convergence blurs Industrial Boundaries, Raising Possibility of Overlapping RegulationsBy Kim Shin-bae CEO and President of SK Telecom Looking back over the last 10 years, it is clear that the Internet has brought about fundamental changes not only in our daily lives but also in corporate and industrial structures. For example, multinational corporations are now able to disperse their functions in global network form. Their production and software design functions can be outsourced halfway around the globe. In short, the Internet's impact allowed flatter organizational structure of companies.For another, it has enabled consumers to become active "prosumers," with the Web 2.0 trend of sharing and participation. Indeed, these changes have completely transformed the ways companies do business at all levels from service planning to production, to distribution. The Internet has also changed the landscape of industrial competition. For example, in the digital music industry, not only existing media companies but also those in chipsets, software, device and communications are in fierce competition over the market. Further, alliances among heterogeneous companies are unfolding in myriads of ways.Such changes have intensified with the advent of mobile broadband. As personalization and mobility ― the advantages of mobile ― become integrated into the existing wired Internet, it has become easier for companies to determine consumer needs and offer various customized services. Moreover, mobile broadband gives consumers the freedom to access contents anytime and anywhere, enhancing cross-device connectivity like 3-screen play or fixed mobile convergence. Although currently such changes are mostly entertainment-related, they are expected to spread throughout the industry as consumers and service providers accumulate more experience with convergence.So, put simply, while the Internet and mobile have "respectively" driven changes over the last decade, I think the "rendezvous" of the Internet and mobile, mobile convergence, will lead those of the next decade. Mobile convergence has certainly been a passion of SK Telecom. We began to provide wireless Internet service in 1999 and wired-wireless integrated Internet service in 2001. We were the first in the world to commercialize EVDO and HSDPA. And recently, SK Telecom has developed a variety of mobile convergence services including Melon (a wired-wireless integrated music service), MBank (mobile banking), T-Map (a location-based service), and T-interactive (a customized information service), Mobile Cyworld (SNS), doing what we can to better people's lives and advance industries. Win-Win Business Model: A Prerequisite of Sustainable Growth So, what does it take for mobile convergence to be stably rooted down in the market? Most of all, a stable revenue model needs to be put in place. Sole dependency on consumer affordability is not enough given consumers' high expectations over low-priced and free services. Recently, ad-based revenue models are expected to narrow the expectation gap between consumers and producers. Nevertheless, there are questions over the sustainability of such models. So, a new business model needs to be developed. I believe that enterprise users, who are willing to pay for solution to increased organizational productivity and creativity, may serve as an axis of future convergence demand. That is, the Internet-driven business transformations taking place now will almost certainly increase the demand for corporate solutions and drive the emergence of various related business models. And besides a stable revenue model, rules on benefit-sharing, or risk-sharing, need to be implemented. As seen in Google's Android platform, Apple's iPhone, YahooPhone, and Nokia's OviPhone, competition over dominating platforms has intensified in the mobile value chain. Moreover, as shown in the 700MHz auction in the United States, the demand for open networks is soaring as well. Should the players in the value chain ill-afford to share the risks associated with network investment, or should they leave network operators to be mere bit pipes, delays and conflicts in mobile convergence are inevitable. I believe a win-win business model to share risks (or benefits) will be chosen in the market over the long haul, even though it may not bring first-best outcomes in the short term.SK Telecom has worked to develop this win-win business model. For instance, the music ring back tone, which SK Telecom developed for the first time in the world, has generated a new business model of mobile music, enabling music service providers to carve out a new market. Moreover, the Biz Ring, ring back tone containing advertising, is presenting new business opportunities to various companies. Roles of Policymakers and RegulatorsAdmittedly, the spread of convergence in the future would require not only the efforts of service providers but also dedicated regulations and policies. First, legal or institutional realignment needs to be considered. Convergence is blurring industrial boundaries, which in turn raises the possibility of overlapping regulation. Blurring of boundaries could also give rise to difficulties in making clear regulatory decisions, and this may lead to regulatory delays stalling the launch of new services.Second, regulators or policymakers need to comprehensively consider both the short and long-term effects of regulations and policies. For example, while disruptive technologies might trigger the penetration of a service with low cost in the short term, they might also lower the incentive for network investment and hamper the provision of high-quality services in the long-term. Finally, global cooperation among regulatory bodies in each country is very important, especially on the issues of interoperability and roaming. As digital nomads cross national boundaries, and as multinational cooperation among service providers is rising, numerous issues have arisen which cannot be addressed by a single government alone. Thus, there is a growing need to establish a global cooperative system for common interests such as technology standardization and political coordination. Against this backdrop, I am confident that this OECD conference will reap fruitful consequences to the development of the Internet economy just as it did 10 years ago.

SK Telecom is the leading mobile phone service provider in South Korea. It also operates phone services in Vietnam and the United States.