You say you want a (broadband) revolution

Robert Maciejko is vice president and managing director of the Boston Consulting Group in Warsaw.

In some ways Poland and South Korea have a lot in common. With more than 48 million residents, South Korea is similar in size to Poland. It has had a similar turbulent history with its two much larger neighbors - Japan and China - as we have had with Russia and Germany. Thirty years ago, Poland was twice as rich as South Korea per capita. Today, though, our country is only half as wealthy.

Success in high-tech areas such as broadband penetration has been one of the drivers of South Korean growth. So far, the digital divide between Korea and Poland is growing. Unless we start getting our act together in broadband access, the wealth differences may further expand in coming years. South Korea is now the worldwide leader with broadband penetration of more than 70%, while Poland's optimistic projections for 2005 call for only a couple of percent of homes being hooked up. As we now hopefully enter the European Union, we need to be sure that enough investment goes into such growth areas and not too much into areas without the same growth potential, such as agriculture.

All eyes are focused on South Korea to understand the phenomenal success the country has achieved in the broadband market since 1998. An amazing 12 million of 15 million households are projected to have broadband connections by the end of 2003. This compares to numbers closer to 100,000-200,000 here. At these levels, South Korean penetration is more than three times greater than even the United States. The high penetration has led to the development of Korean applications and services that have not yet appeared elsewhere.

The rapid adoption of broadband in South Korea has had several drivers:

- A very high penetration of PCs. About 70% of all households there had PCs in 2001 versus about 15% of all households here.

- Low broadband subscription fees. In South Korea, subscription fees start at less than e26 a month for quick connections compared to the U.S. and most European countries, including Poland, where monthly fees can be more than e43 for slower links.

- The high popularity of Internet cafes, where people get to test-drive broadband services. In South Korea, there are about 30,000 such establishments (the number more than doubled in the last four years), where people gather with friends to play online games, check e-mail and have video-chats or even blind dates.

- Highly popular applications that build on broadband strengths have been developed in South Korea. Among them are notably games with "always-on" features and networking capabilities that allow thousands of users to play simultaneously.

- Strong government support in fostering broadband adoption. For example, the South Korean government plays an instrumental role in increasing PC penetration by giving incentives to computer makers to offer inexpensive models and by requiring all public schools to offer computer training in exchange for free broadband connections.

All these factors drove achievement to critical mass, and there has been a clear snowball effect: the popularity of high-speed and continuous connections ignited the growth of a broad range of applications beyond games, including video-chatting and stock trading (which was available before but tripled in the last few years, and now accounts for more than 50% of all transactions conducted via the Internet). E-commerce is now growing twice as fast in South Korea as in other countries, especially electronic banking and Internet shopping malls, but also online education, including foreign language classes and school entrance-exam preparation.

Broadband has started to fundamentally transform lifestyles in South Korea. Users tend to spend an average of 16.3 hours per month online, compared with 10 hours in the U.S. and 7.9 hours in Japan. Higher Internet usage seems to be cutting into the time that South Koreans spend watching TV (in 2001, TV viewing time dropped 8.6% despite a growth in offerings) and even sleeping. Finally, more and more consumers are willing to pay for content, especially for e-learning and video on demand.

In South Korea, the total revenue attributed to the broadband market (including access, content, commerce and equipment) already exceeds 2% of GDP. The key question for Poland is how to create an environment in which such critical-mass penetration can be achieved. In some ways, South Korea with its urban, highly educated, youth-oriented and technologically savvy society is not a typical market. But to dismiss the country's experience as irrelevant would be a mistake.

First of all, significant action would be required from broadband providers, such as fixed-line operators and cable companies. In South Korea, companies subsidized penetration in the short term in anticipation of strong revenues when critical mass was reached. Providing consumers with opportunities for test trials - either in PC rooms or at home, with low connection fees and short contracts - was also key.

The South Korean government was also a key driver of broadband expansion. Its initiatives over the past years can be used as a benchmark for other countries. The government implemented a "hands-off" policy, removing all entry barriers and giving away multiple licenses. Authorities also worked to educate more than 10 million people by offering various Internet education programs and offering youths subsidized computer and Internet courses through hundreds of institutions. Many special programs were also sponsored for specific nonobvious target groups: housewives, unemployed females, the disabled, elderly, low-income children, prisoners and rural residents. Apart from providing free broadband access in schools, free Internet usage has also been introduced at 116 post offices.

South Korea's government itself created compelling content when streamlining a significant part of government-consumer relations over the Internet in the so-called "G4C project." The program's objectives were to provide a single point of access available 24 hours a day, reduce paperwork and offer more transparency and openness in administrative procedures. In Poland, we have an electronic-signature law, but no real clear progress in e-government.

Finally, the South Korean government placed a lot of emphasis on nurturing private digital content-related businesses, for example, by supporting new business setups. Ten specialized funds have been established to support small- to mid-sized venture companies in the areas of telecommunications, networks, software and the Internet.

The South Korean broadband example shows that broadband access can be a truly mass-market product in a country that was of comparable wealth to Poland not so many years ago. It is a challenge now for both market players and the government to creatively apply the lessons learned.