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The Strategy for Building Information Society in Korea


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  • 1. The Strategy for Building Information Society in Korea Kijoo Lee Senior Information Officer Informatics Program, ISG The World Bank The Conference for Financing Information Society Santiago, Chile July23, 2003
  • 2. Content I Korea‟s ICT Status and Achievements II Korea‟s Informatization Promotion Strategies III Financing the Informatization IV Success Factors and Future Tasks V Cooperation between DGF/MIC and Latin America VI Concluding Remarks 2
  • 3. I. Korea‟s ICT Status and Achievements
  • 4. Korea‟s ICT Status (End of 2002) Unit: 10,000 Subscriber 3,500 Digital TV : 1,080,000 3,000 68% Penetration : 7.3% of 2,500 of Total Household population 58% 2,000 49.3% of population IT Industry Production : of population 12% 1,500 36% 160.1 Billion USD of population of (14.9% of GDP) 1,000 population 70% 500 of households IT Export : 46.4 Billion USD 0 28.6% of Total Export 4
  • 5. Achievements Building Network Based Economy • Leader in Broadband • Leader in 3G Service Growth Engine of Economic Informatization Growth • Economic Efficiency • 21.3% growth per year • Building E-Government 5
  • 6. II. Korea‟s Informatization Promotion Strategies
  • 7. Korea‟s Information Promotion Strategies Network Bridging Frameworks E-Government Build-out Digital Divide Resolving ICT Industry Competition Adverse Effects Promotion Promotion Strategies 7
  • 8. 1. Frameworks Strengthening the Informatization Basic Plan for Informatization Strategic Framework Legal & Regulatory Frameworks Informatization Promotion Fund 8
  • 9. Strengthening the Informatization Enactment of the Act on Promotion of Utilization of Information & Communication Network(’86) Formation of the Electronic Network Management Committee(’87.5) The establishment of the informatization promotion system - MIC for balanced development - Informatization Promotion Act - Informatization Promotion Committee - Informatization Planning Office in MIC - Special committee for the e-Government 9
  • 10. Basic Plan for the Informatization Promotion The Basic Plan for Informatization Promotion is established every 5 yrs - Implementation plans for the area of administration, finance and economy are in the form of rolling plan Established the Cyber Korea 21(’99.3) and e-Korea Vision 2006(’02.3) - Increase the impact of the informatization on all economic agents including the public, businesses and the government 10
  • 11. Legal and Regulatory Frameworks A total of 187 acts have been enacted or revised based on the results of the analysis of 7 rounds from ’95. - 86 laws, including the Basic Act on Informatization Promotion, have been enacted or revised for informatization promotion in the public sector - 101 laws, including Acts on Digital Signatures and Online Digital Contents Industry Promotion, have been enacted or revised for the development of the IT industry and informatization of the private sector 11
  • 12. Informatization Promotion Fund The promotion of informatization requires large scale investment, calls for cooperation of various organizations, and last for several years. So, it is difficult to carry out the projects with the general budget. The Informatization Promotion Fund was established as a special vehicle to overcome the budgetary restrictions in order to promote the informatization project. The fund is managed by MIC. The Fund, based on government budgetary and private sector contribution, created the system for letting the profits from ICT fields be reallocated into ICT sector. 12
  • 13. 2. Network Build-out Mondernize Fixed Line Network Fast 2G/3G Roll-out Build-out Leading Broadband Network 13
  • 14. Mordernize Fixed Line Up to early „80s, fixed line facilities were lagging behind in terms of quality and quantity. (penetration rate was 7.2%) Major Policies - Financed the large-scale investment through installation fee, telephone bond, tariff, etc - Korea became the 10th producer in the world with the successful development of fully digitized telephone switching system, TDX-1 in ’86 -1987 marks the opening of the ‘1 phone per person’ era, completing the digitization of wide area telephone switching and achieving no waiting list for telephone line installation Those resulting high quality telephone networks provide the physical basis for the roll out of xDSL, Broadband Internet. 14
  • 15. Fast 2G/3G Roll-out Up to the middle of the 80‟s, wireless services were limited. Major Policies - In ’84, Korea Mobile Telecom was spun off from Korea Telecom - Successful deployment of CDMA with the investment of USD 84.44M from ‘89 to ‘96 - Introduced the competition issuing licenses of 1 cellular operator in ‘94 and 3 PCS operators in ‘96 - Licenses granted for 3G operators(2 for W-CDMA, 1 for CDMA 2000) in Mar and December, 2002 The number of mobile service subscribers surpassed that of the fixed service in Sep, ‟99. The number of subscriber is now at 32.34 million, ranking 8th in the world as of Dec, „02 . In addition, with the expanded usage of 3G service(CDMA-1X, launched in Oct „00), the number of subscribers had reached 17.2 million as of the end of „02. By the end of this year, 3G service(W-CDMA) will be offered in the Seoul metropolitan Area. 15
  • 16. Leading Broadband Network In March 1995, Comprehensive Plan for KII(Korea Information Infrastructure) was launched for the construction of a nationwide optical network. - USD 9B was invested for this project. Government funds USD 1B for the KII-Government, KII-Testbed. KII-Testbed KII-Government KII-Public Main User Research Institute Government Home and Business Investor Gov’t+Private Government Private Main Target Testbed Backbone Network Access Network - In December 2000, 144 call zones were connected through high speed large capacity optical cables(155Mbps- 5Gbps). - A variety of resources including CATV, telephone line, satellite, optical cables were used for access network in KII-Public. ADSL was especially endorsed. By 2005, USD 16.3B(government funds: USD 1.76B) will be invested while service with speeds of 622Mbps for government and business, and 20Mbps for households will be provided. 16
  • 17. 3. E-Government National Basic Information System was classified into 5 areas of administration, finance, education and research, defense and national security and carried out. - National DBs for the essential information was constructed. - USD 250M was invested from ’87 to ’96. National Basic Information System, electornizing basic administrative information and connecting administration, enhanced efficiency of the public sector and high quality of administrative service. E-Government Special Committee was organized to complete e-government by 2002, and initiated the 11 key projects. - Single Window e-Govenrment(G4C), National e-Procurement(G2B), National Finance Information System(G2G) were implemented. - USD 190M was invested from ’01 to ’02. 17
  • 18. 4. Bridging the Digital Divide With the rapid rise of informatization, the Digital Divide between classes and regions began to widen in the „90s. Bridging the digital divide - KADO(Korea Agency for Digital Opportunity & Promotion) develops regional informatization projects, creates greater awareness of informatization, and runs computer education program - Comprehensive Plan for the resolving the digital divide was established in ’01. - 10 million people(21%of the population) education program completed. - 4,397 information facilities have been setup for the free in remote and rural areas. - KT is obliged to provide broadband internet service(1Mbps) to all farming and fishing village by 2005. 18
  • 19. 5. Resolving Adverse Effects With the spread of information technology, we witnessed the social losses such as privacy infringement, computer hacking and computer viruses. In order to keep these losses to a minimum, the countermeasures for the adverse effects of informatization were established and Implemented in Oct ‟99. - Digital Signature Act(Feb ‘99) and Basic Act on Information Security(Jan ‘01) - Certification Body for Digital Signature was designated(Feb ‘00) - Personal Information Mediation Committee was established (Dec ‘01) - Enforcing the law and regulation to protect against spam mail 19
  • 20. 6. Competition(1) Market Structure(‟02.12) Monopoly Duopoly Competition Local „97 Long Distance „96 ‟97(3) International „90 ‟96(3) Leased Line „90 ‟96(18) Broadband „99 ‟00(6) Mobile Phone „94 ‟96(3) 3G „03 ‟04(3) ( ) : Number of operators 20
  • 21. 6. Competition(2) Regulatory Body KCC(Korea Communication Commission) was established in 1992 - 7 Commissioners(including the chairperson) Appointed by the President - 3 Special Committees - Legal Issues/Contracts, Tariff, and Accounting - 5 Divisions and 25 Employees Major Functions - Examine the agreement regarding provision of facilities and interconnection - Investigate unfair practices and arbitrate consumer loss and damage - Authorize the agreement between telecom operators - Arbitrate disputes of network sharing and interconnection between operators 21
  • 22. 6. Competition(3) Regulatory Framework for Competition Incumbent‟s market dominance has become strong through M&A. Growing concern for the level playing fields. Major Policies - KT Privatization : Privatization Plan was setup in ‘87, the process was started from 1993 and completed in Feb 2002 - Interconnection : Essential facility owners are required to provide interconnection - Accounting Separation : Ban on cross subsidy of facility-based service operator - Tariff : Approval(Local:KT, Mobile:SKT) and Notification(the others) - Carrier Pre-selection for long distance introduced in ‘97 - Universal Service Fund : Introduced in Jan ’00. - LLU (Local Loop Unbundling) introduced in ’02 • For : Local networks, Broadband Networks • Type : Full Unbundling, Line Sharing, Bit-stream Access 22
  • 23. 6. Competition(4) Future Plan Number Portability - Local Telephony : Implementing stage-wise from Jun ’03 to Dec ‘04 - Mobile : Implementing in 6 months intervals in order of SKT(1st), KTF(2nd), and LGT(3rd) from Jan ‘04 Long-Run Incremental Cost - Assess the connection charge most effectively - Plan to establish detailed plans based on policy research reports coming December Revise Universal Service - Review the possibility of including the broadband in universal service after 2005 23
  • 24. 7. ICT Industry Promotion Public-Private Partnership in R&D Relied heavily on foreign technology and equipment until middle of 80’s. MIC, research institutions and manufactures launched partnership for developing TDX and CDMA technology. The domestic ICT industry could acquire technology and enjoy the cost advantage. Expand R&D through ICT Human Resource Development Need to increase the number and quality of highly trained workers to create a R&D base and for the early realization of the information society Established the Information and Communication University in 1998, established IT related department in universities, sponsored research projects, media support, and scholarship Develop SW, Digital Contents Industry Crack down on illegal copying, prevent sharing of software;support the production and creation of computer games and multimedia contents, support new ventures 24
  • 25. III. Financing the Informatization
  • 26. Financing the Informatization Informatization Promotion Fund Informatization Universal Service Support Program Fund for Public Sector KII-G & KII-P Tariff Strategy Financing the Informatization 26
  • 27. 1. Informatization Promotion Fund Goal Status of Fund Investment Promotion of e-Government Funding: Total of 7.78 billion USD (‟93~‟02) Broadband Network Roll-out - Government : USD 3.06B (39.3%) Support R&D and Standardization - Private Sector : USD 3.59B (46.2%) - Miscellaneous profits and interests: Educating human resources in ICT USD 1.13B (14.5%) Investment: Total of 5.33 billion USD (‟94~‟03) Management - Broadband infrastructure and promotion: USD 800M (15.1%) MIC(overall management), IITA(specific - Informatization promotion: USD 1.07B (20%) project management) - Infra for IT industry: Fund Management Council (Evaluation) USD 375M (7%) - Chair : Vice Minister of MIC - IT R&D : USD 2B (37.5%) - Members : Director Generals of related - ICT Human Resource: USD 950M (17.8%) - Standardization: USD 135M (2.6%) Ministries 27
  • 28. 2. Informatization Support Program for Public Sector (1) Major support area & outcome Search and support informatization projects that are difficult to pursue at the ministerial or autonomy level - Construct the infra for information integration and sharing among departments - Maximize the effect of investment using economy of scale and scope - Support projects that promote regional informatization and narrow the digital divide From 1994 to 2002, USD 310M has been invested into 328 informatization projects such as Local Government Administration Information System and Home Tax Service 28
  • 29. 2. Informatization Support Program for Public Sector (2) Assignment of General Budget & Fund General Budget was used for the ministerial project that are directly related to the management or expanded usage. The fund mainly dealt with infra construction that is difficult to carry out on the single agency level - Projects that involve integration or information sharing among ministries - Long term, large scale informatization projects with confirmed feasibility through the pilot project which minimizing risks when implemented in the public sector - Projects that need confirmation of adequacy when applying new technology or projects dealing with pending problems that need to be carried out quickly - Projects that research and develop coordination of interests, management methodology, project management models, etc Settlement After Investment The risks that large scale network projects entail were dispersed and budgetary limits were overcome. 29
  • 30. 3. KII-G and KII-P KII-G Rate Structure of KII-G Business The government invested public funds Exemption and settled accounts after the completion of projects. Facilities are reverted to the Government business and investment funds are set Setoff Share Fee off by the user fee. Usage User Fee KII-P Private companies invest their own funds. Government provide loans or portion of the funding as a means of narrowing digital divide. Loan was provided USD 360M as the end of ‟02. 30
  • 31. 4. Universal Service Fund Concept Methods Prior Competition : Subsidized by the profitable To provide the basic local long-distance and international services communication services at Early stage of Competition(’95) : NTS Subsidies reasonable cost, the losses from Fund and connection fee structure facilities investments are Rise in Competition : Shared based on revenue subsidized by telecos levels, with the enactment of the Business Act Type 2002 Subsidy Fund Local Telephony, Public Telephone Total Losses : USD 470M Emergency Service, Wireless Subsidies(rate) : USD 220M (46%) Marine Communication 31
  • 32. 5. Tariff Structure Implemented various tariff structure between „70s and „90s to create the large scale investment resources for the network build-out Major Service Tariff Structure Fixed Telephony Mobile Phone Installation Charge(USD 205) and Installation Charge(USD 550) Telephony Bond (USD 170) Changed to deposit and subscription Incremental increase in local service charge system after the introduction charges of competition in 1996. Procurement Fixed Service : Investment increased greatly to 7.5%(previously 3%) in total investment, which reached USD 8.22B from „80 to „87. Mobile Service: USD 930M from „85 to „95 32
  • 33. IV. Success Factors and Future Tasks
  • 34. Success Factors Success Factors Government Competition Leadership Policy Focused Effective Strategy Financing 34
  • 35. 1. Success Factors(1) Government Leadership Adoption of a government led model Application of effective policy vehicles including planning, laws and regulations, funds and organization Focused Strategies Investments focused in the future demand of ICT Building the infra and implementing e-Government and e-commerce for the knowledge-based economy R&D efforts in human resources, TDX-1, and CDMA technology 35
  • 36. 1. Success Factors(2) Effective Financing Informatization Promotion Fund enabled focused investment in ICT. Developed effective investment criteria such as settlement after investment Attracted private investments with government‟s seed money. Competition Policy Liberalization and open competition in local telephony and broadband created the mass market that formed virtuous cycle by reducing the cost. Unique habitat(60% of population lives in high rise apartment) Rapid increase of internet users with the rise in computer usage and real time information exchange Online game, “PC Bang” as well as Internet Café 36
  • 37. Future Tasks Solving Adverse Effects Strategic Regulatory Reform Investment for the Convergence Coordinating Optimization of Divergent Interests Network Usage Future Tasks 37
  • 38. 2. Future Tasks(1) Coordinating Divergent Interests Establishment of a general office responsible for ICT and maintaining strong government leadership giving ICT top priority. Strategic Investment Concentration on strategic areas such as construction of infra inducing voluntary participation from the private sector Solving Adverse Effects Measures minimizing the adverse effects of informatization in all areas including security and privacy, and preventing the digital divide between the rich and the poor 38
  • 39. 2. Future Tasks(2) Regulatory Reform for the Convergence Continuous regulatory reform to encompass the convergence such as telecom and broadcasting, etc. Optimization of Network Investment Prepare the measures optimizing network investment such as interconnection and sharing of a base station. 39
  • 40. V. Cooperation between DGF/MIC and Latin America
  • 41. 1. Status of Cooperaton(1) Development Gateway Foundation (DGF) DGF - DGF’s mission is to reduce poverty and support sustainable development through the use of ICT. DGF is a not-for-profit organization, established in Dec 2001, currently based on Washington, D.C.. - ISGIF (Information Solutions Group Informatics Program) of World Bank supports the actual operations including human resources and technology. Major functions - Operate the Portal( - Organize ICT Development Forum - Operate the Research and Training Network - Support e-Government Project (Grant Program) - Support the Country Gateway(Grant Program) - Provide electronic Procurement Service(dgMarket) 41
  • 42. 1. Status of Cooperation(2) Major cooperation status with countries of Latin America - 13 country gateways have been established in Latin America; Argentina, Bolivia, Brazil, Colombia, Costa Rica, Dominican Rep., El Salvador, Guatemala, Jamaica, Nicaragua, Peru, Uruguay, and Venezuela (total 44 country gateways) • Country gateways are locally-owned partnership-based initiatives that pursue DGF’s mission on a local level - The ICT Training Center(DGF-KTC) established in Seoul, Korea in Nov 2002 offered training programs for 24 participants from 12 countries such as Argentina, Bolivia, Chile, Colombia, El Salvador, Guatemala, Jamaica, Mexico, Paraguay, Peru, Uruguay, and Venezuela.(Total 128 trainees from 49 countries) 42
  • 43. 1. Status of Cooperation(3) Ministry of Information & Communication (MIC) Formed economic and telecommunication cooperation committee with the major countries of Latin America to facilitate cooperation in the ICT fields MOU Agreements and Telecom Cooperation Committees : Chile, Mexico, Brazil Economic Cooperation : Chile, Mexico, Brazil, Argentina, Peru, Venezuela, Paraguay, Colombia, Ecuador, Bolivia, Jamaica, Uruguay, Suriname(13 Countries) 43
  • 44. 2. Future Cooperation DGF Continue its efforts in sharing knowledge and experience thru country Gateway and promoting cooperation thru projects Increase participation of DGF-KTC program(expanding the # of courses from8 to 10; establishing the distance learning program) MIC Promote ICT related policies and human resources exchange Organize seminars to acquire and exchange information Create opportunities for experts and specialists to share experience in different fields when necessary 44
  • 45. VI. Concluding Remarks
  • 46. Concluding Remarks • Information Society is a national goal for all countries. • Strategic design encompassing the unique environment is a key for the success. • Korea‟s experience and success can be considered as a reference for a unique model of development for the information society. 46