“Microsoft is joining the heated competition of the Internet-Protocol TV market in Korea with two local partners by piggybacking on existing networks of other telecommunication firms…”
Seoul — Software Maker Microsoft Corp. said Tuesday that it has signed agreements with two South Korean firms for a joint venture into the country’s emerging Internet TV market.
The deal reached here involves, South Korea’s second-largest portal Daum Communications Corp., and local set-top box maker Celrun Co., are Microsoft’s new partners to enter the local Internet TV market, said Daum spokeswoman Park Hyun-Jung.
“Daum will provide content and know-how, while Microsoft will offer its own IPTV solutions and focus on overseas marketing, she said. Celrun will provide equipment.”
“Internet TV allows viewers with a broadband connection to choose content as well as receive live programming.”
Despite being one of the world’s most wired societies, South Korea has been relatively slow in the market because of disagreements between the broadcasting and communications industries.
It is the first time for the world’s largest software maker to set up a broadcasting service company. But the new IPTV service, which will be the fourth of its kind in Korea, has a bumpy road ahead as it needs approvals from the government and the Internet line owners, such as KT, Hanarotelecom and LG Dacom, which hardly welcome new entrants.
Internet TV is fast emerging as a significant alternative to the traditional way of watching TV programs, by allowing viewers to choose and view TV contents interactively via a broadband Internet connection. More than 1 million households have already subscribed to the service in Korea.
“The deal is part of our preparations to launch the IPTV service following the recent passage of a related bill in parliament,” Park said in a statement.
Currently available services mostly consist of video-on-demand (VOD). Recently, a bill passed the National Assembly, allowing for a complete version of Internet-protocol TV (IPTV), under which customers will be able to watch not just VOD’s but also real-time contents including sports, dramas and news.
“While preparing this project, I regretted not starting this one or two years’ ago,” Yoo Jae-sung, president of Microsoft Korea, said during the press conference at Plaza Hotel in Seoul.
“There are already 20 IPTV providers in 18 countries that use Microsoft’s platform, so it is quite late to do it now in a country like Korea, which has a well-established IT infrastructure.”
“We aim to start the VOD service in the second quarter of this year when the joint venture is formally launched,” Park said.
“We are also ready to provide real-time broadcasting if we acquire a license from the government.”
The three firms said they will set up a joint venture firm in February, start the demo service in July, and the subscription service in around December, only if they get the license from the government by November.
The amount of initial investment from each company will be announced later, but Daum will take the leading role, said Brian Jeong, Daum’s Convergence Biz team leader.
The Microsoft consortium will face tough competition in the Korean IPTV field with three big, well-financed telecommunication powerhouses, Hanarotelecom, KT, and the pair of LG Dacom and LG Powercom. The fact that it does not own its own Internet network will exacerbate the situation.
Like almost all other telecommunication issues in Korea, the government holds the key to solving the problem. Since last year, the government and lawmakers have been working to enforce telecom firms to open their network to others like the Microsoft-Daum-Celrun consortium. But it has yet to be decided how it will do so without damaging fair competition in the market.
KT, the dominant Internet line operator in Korea, does not welcome such an open-door policy, an official of its rivaling company said. KT said it’s too early to talk about it.
“All we can say now is that we will talk with related parties once the new regulations are set up in around April,” said KT spokeswoman Alice Park.
Daum is the latest tech company to announce its bid to enter the fledgling but high-potential market. Hanarotelecom Inc., a fixed-line Internet operator, is the leader in the VOD Internet TV industry, holding around 800,000 customers, trailed by communications giant, KT Corp.
The so-called Open IPTV will use Microsoft’s Xbox 360 video game console as the set-top box and its Mediaroom system as the software platform. Daum, the second largest Web portal, will provide various entertainment contents and set up advertisement revenue models. Celrun will provide its set-top boxes to Microsoft for overseas markets only, because it is already supplying similar devices to KT and Hanarotelecom here, the firm said.
“It will also allow users to view foreign TV channels via Microsoft’s global network, they said.”
Many TV, Internet and telecommunications firms have raised investment in the field and the market is expected to boom once the government allows real-time broadcasting of popular terrestrial channels on IPTV sometime this year.
“The IPTV market, which absorbed about 1.1 million domestic clients last year, is growing fast. We predict there will be 16 million local clients by 2011,” Park said.
Nevertheless, Microsoft and Daum remained optimistic that time will be on their side. Daum’s Jeong said that they can make the line lease contract either a lump sum, or in a pay-per-use plan.
“We want to build a win-win business model,” said Microsoft senior manager Yoo Jae-gu.