Executive Summary

This Asia market report covers 8 economies in the North Asia sub-region. It takes an overall look at the various telecoms markets, together with a particular look at the broadband Internet and mobile segments in each of the economies. The markets covered include:

China has built a substantial nation-wide telecommunications infrastructure wit fibre optic cable networks covering the country. Pushed along by government policy to find cost-effective communication solutions, China has become the world’s biggest user of Voice over Internet Protocol (VoIP) services.

China is also the largest mobile communications market in the world. By mid-2005, China had around 350 million mobile subscribers or more than 30 for every 100 people. The remarkable growth in the mobile sector has been boosted by increased competition, lower terminal prices and the rapid rise of prepaid services. The popularity of the Personal Access System (PAS) known as Little Smart being offered by the fixed line operators has also boosted the market.

By early 2005, the number of Internet subscribers in China had grown to 100 million, or 12% of the world Internet user base. The Chinese government remains well aware of the enormous social and economic value of Internet and its importance in creating a prosperous nation. At the same time, however, it is concerned by the perceived risk to cultural heritage and to political stability.

China is also emerging as a broadband superpower, showing further strong growth coming into 2004. Though penetration remains comparatively low, in early 2005, broadband was growing in China at a rate of around 8% per month (or close to 100% per annum), with China Telecom being the largest supplier.

Hong Kong - Consistent with its status as one of the leading telecommunications economies in the world, Hong Kong has built itself world-class infrastructure. Digitalised since 1995, the Special Administrative Region (SAR) has been wired with almost 400,000km of optical fibre, with the vast majority of households covered by this extensive broadband network. Hong Kong is also a key regional telecommunications hub and as such is the landing point for a significant number of strategically important submarine cables.

Growth in Hong Kong’s booming mobile phone market continued through 2004. By early 2005, penetration had reached 103% and Hong Kong was in top place in the Asian mobile. With an adult population of 5.9 million, the market has moved closer to saturation and the opportunities for further significant growth may finally be starting to shrink.

Hong Kong has also been experiencing rapid growth in its Internet market. The speed of its expansion was highlighted in the first half of 2001, when Hong Kong had the highest rate of growth in the world for household Internet penetration. There were an estimated 4 million Internet subscribers in the territory, gaining access using mainly broadband but also dial-up. There were around 190 ISPs by end-2004.

Japan - With its sophisticated infrastructure, Japan’s telecommunications sector is one of the most active markets in the world. The development of local infrastructure in Japan has been dominated by the government’s push to have incumbent NTT open up access to the ‘last mile’. Although fixed-line services remain important, they have begun to decline.

By end-2004, Japan had more than 23 million broadband Internet services in place. Much of the success of broadband in Japan is owed to the stunning growth in ADSL broadband services. Japan is at last living up to earlier expectations of becoming a dominant player in broadband use.

Into 2005, Japan has the third largest number of Internet users after the USA and China, if mobile Internet users are included in the tally. (China passed Japan in 2004.) Fibre-to-the-Home (FTTH) Internet access has been making impressive progress in the Japanese market. Japan is also one of the world’s hottest markets for IP telephony. It has been predicted that the country will have 28 million Internet phone lines operating by 2007.

Although Japan’s 2G mobile telephone sector has entered a maturing market phase, the overall Japanese mobile market remains dynamic. By March 2005, Japan had almost 87 million mobile subscribers, with over 34 million subscribers signed up for 3G services. Wireless Internet and mobile services have helped to keep the mobile market stimulated. Into 2005, Japan continued to lead the world in wireless Internet users with 52 million in early 2005.

Macau, a Special Administrative Region (SAR) of China, remains very low profile compared with its bustling sister SAR, Hong Kong. The territory has quietly built itself a strong modern telecommunications infrastructure, equal in standard to that of any other country in the region, with significant penetration of telecom services. The fixed-line network reached a saturation point a few years ago. Now, the country’s mobile market has been growing strongly. With 450,000 mobile subscribers or a penetration of 93%, the market is nearing saturation. Macau has been busy adopting Internet in its various forms and the administration appears keen to encourage this. Broadband Internet, using ADSL, has started to develop. By March 2005, more than half of all Internet subscriptions in Macau were broadband-based.

Mongolia is committed to developing a more efficient telecommunications network and is making solid progress. However, its telecommunications infrastructure still needs work. A more efficient telecom network is a key element in Mongolia’s economic development. An explosion in the mobile market in the period since 2001 has seen subscriber numbers rise to over 400,000 or a 14% penetration by March 2005.

Mongolia has made early moves into broadband Internet. Mongolia Telecom quickly signed up several thousand subscribers, after entering into an agreement with Korea Telecom in 2001 to set up a pilot ADSL service. However, most broadband users reside in the capital Ulaanbaatar and are mostly government ministries and foreign companies.

North Korea - Telecommunications in North Korea is seriously impeded by a combination of its generally poor economic state and the government’s widespread repression of communication. The number of fixed-lines and the volume of voice traffic in North Korea are minuscule compared with South Korea. Because of its mountainous landscape and the high cost of building fixed-line networks, a mobile telephone network is considered a much more viable option. The country established a joint venture with a Thailand-based company to set up a mobile service in a special economic zone in north eastern North Korea. North Korea remains the only country in the world that had yet to adopt the Internet for public usage.

South Korea - With its government adopting a very progressive approach to deregulation, liberalisation and privatisation of the local telecom industry, South Korea has become one of the world’s major players in the market. The result has been willingness on the part of operators to invest in infrastructure and to be innovative, providing the basis for a booming telecommunications market.

The country’s fixed-line telephone market in South Korea continues to be dominated by the incumbent KT, formerly known as Korea Telecom. This is despite the market being opened up to competition in 1997.

South Korea is the fourth largest mobile market in Asia, having 37.5 million subscribers by March 2005. (It was passed by India in 2004.) The market was reaching a point of saturation, with a penetration of 77%. With many value added services coming onto the market, South Korea continues to push the boundaries of mobile communications. South Korea’s development as a leading mobile market has been boosted by low tariffs and terminal costs, the introduction of competition in 1996, the nationwide roll out of Code Division Multiple Access (CDMA) technology and the arrival of camera-equipped mobile phones. Third Generation (3G) phones and advanced mobile services such as mobile gaming, m-banking and m-commerce have also kept the mobile market invigorated.

South Korea has become the most penetrated broadband market in the world, with over 80% of all homes with Internet accessing the network via a high-speed connection. South Korea is also a world leader in the commercial application of broadband Internet technologies. The country’s impressive broadband progress began in the late 1990s when the government issued a policy mandating that operators provide a 2Mb/s connection for every citizen. This broadband policy, combined with a competitive market and a densely populated and computer literate society, laid the foundations for Korea’s burgeoning broadband market.

Taiwan has adopted a long term approach to significantly upgrading its telecommunications infrastructure, undergoing a series of network modernisation projects in the last decade or so. Consistent with the performance of Taiwan’s impressive mobile sector – one of the highest penetrated mobile markets in the world – the country has been energetically moving into the ‘next generation’ of mobile services. (After hitting a peak penetration of over 110%, the country had slipped back to about 93% in early 2005.) Taiwan awarded five licences for Third Generation (3G) services in early 2002 and, in so doing, was the first market in Asia to hold a 3G auction in which there were more bidders than licences.

The Taiwanese government has been actively promoting broadband and has committed the country to being on a par with the US by 2010. As a result of this, Taiwan has rapidly become a significant player in broadband Internet access. By mid-2005, over 50% of households with Internet access had a high speed broadband connection.

1. EXECUTIVE SUMMARY
1.1 Key developments
1.1.1 Internet market
1.1.2 Broadband market
1.2 Internet market
1.3 Broadband market
2. OVERVIEW OF THE BROADBAND AND INTERNET MARKETS IN ASIA
2.1 Internet market
2.1.1 Market overview
2.1.2 Cultural and regulatory issues
2.1.3 Internet advertising
2.1.4 Asian Domain Name Dispute-Resolution Centre
2.1.5 Internet access and infrastructure
2.1.6 ISP market
2.1.7 Intranets and extranets
2.2 VoIP
2.2.1 Overview
2.2.2 China
2.2.3 Hong Kong
2.2.4 Japan
2.2.5 South Korea
2.2.6 Taiwan
2.3 Broadband market
2.3.1 Market overview
2.3.2 Digital Subscriber Line (DSL)
2.3.3 Cable Modem
2.3.4 Fibre-to-the-Home (FttH)
2.3.5 Wireless broadband
2.3.6 Satellite Internet
2.3.7 Powerline Broadband (PLB) / Powerline Communications (PLC)
2.3.8 Major broadband markets in Asia
2.3.9 Fibre-to-the-Home in Asia
3. CHINA
3.1 Internet market
3.1.1 Analysis – slowdown of Internet growth in China – January 2005
3.1.2 Promotion of Internet access
3.1.3 Internet statistics
3.1.4 IPv6
3.1.5 Internet regulation
3.1.6 Internet cafes / wangba
3.1.7 ISP market and networks
3.2 Broadband market
3.2.1 Overview
3.2.2 Broadband service providers
3.2.3 Broadband networks
3.2.4 Broadband services
3.3 Content and E-services
3.3.1 E-commerce
3.3.2 E-business and B2B e-commerce
3.3.3 Online trading
3.3.4 E-government
3.3.5 E-entertainment
3.3.6 E-banking
3.3.7 E-medicine
3.3.8 E-advertising
3.3.9 E-services providers and Websites / portals
4. HONG KONG
4.1 Internet market
4.1.1 History and statistics
4.1.2 Internet traffic volume
4.1.3 Domain names
4.1.4 Internet usage
4.1.5 ISP market
4.2 Broadband market
4.2.1 Broadband access
4.3 Content and E-Services
4.3.1 E-commerce
4.3.2 E-Government
4.3.3 E-entertainment
4.3.4 E-communications
5. JAPAN
5.1 Internet market
5.1.1 Mobile Internet use
5.1.2 Internet via fixed-line phones
5.1.3 Info-communication industry trends
5.1.4 Internet regulation
5.1.5 Internet network
5.1.6 Internet roaming
5.1.7 Internet development
5.1.8 ISP market
5.1.9 Japan Internet Providers Association (JAIPA)
5.1.10 Websites / Web properties
5.2 Broadband market
5.2.1 Overview
5.2.2 Broadband on demand
5.2.3 Info-communications infrastructure
5.2.4 Government’s IT Basic Strategy
5.2.5 Regulatory environment for broadband
5.2.6 Multimedia and broadband
5.2.7 Impact of broadband on voice market
5.2.8 Broadband content
5.2.9 Asymmetrical Digital Subscriber Line (ADSL) market
5.2.10 Major ADSL providers
5.2.11 Cable broadband
5.2.12 Fibre-to-the-Home (FttH)
5.2.13 Wireless broadband
5.2.14 Powerline broadband / powerline communications (PLC)
5.2.15 Global LAN Ethernet
5.3 Content and E-services
5.3.1 E-commerce
5.3.2 E-cash
5.3.3 E-banks
5.3.4 Online trading
5.3.5 E-government
5.3.6 E-entertainment
5.3.7 E-services providers
6. MACAU
6.1 Internet market
6.1.1 ISP market
6.1.2 Licensing of Internet services
6.2 Broadband in Macau
6.2.1 ADSL
7. MONGOLIA
7.1 Internet market
7.1.1 Mongolia Internet Exchange
7.1.2 ISP market
7.2 Broadband market
7.2.1 ADSL pilot project
8. NORTH KOREA
8.1 Internet market
8.1.1 Websites
8.1.2 E-mail service
8.1.3 VoIP
8.1.4 Internet cafes
9. SOUTH KOREA
9.1 Internet market
9.1.1 Statistical overview
9.1.2 Internet usage trends – NIDA July 2004 survey
9.1.3 ISP market
9.1.4 Websites / online portals
9.1.5 Apartment LANs
9.1.6 Internet Protocol Virtual Private Network (IP-VPN)
9.1.7 Internet Protocol version 6 (IPv6)
9.1.8 Telephone Number Mapping (eNUM)
9.1.9 Hybrid wireless / fixed-line Internet
9.1.10 Internet cafes / PC bangs
9.2 Broadband market
9.2.1 Overview
9.2.2 Growth drivers
9.2.3 Statistical overview
9.2.4 uKorea / ubiquitous Korea
9.2.5 Major broadband ISPs
9.2.6 Broadband services
9.3 Content and e-services
9.3.1 Key Internet access applications
9.3.2 E-commerce
9.3.3 Online trading
9.3.4 E-banking
9.3.5 E-government
9.3.6 Online gaming
10. TAIWAN
10.1 Internet market
10.1.1 Domain names
10.1.2 Profile of Internet users
10.1.3 Public Internet access
10.1.4 Direct Internet access network
10.1.5 TWGate
10.1.6 ISP market
10.2 Broadband market
10.2.1 Overview
10.2.2 ADSL
10.2.3 Cable modems
10.2.4 Wireless broadband
10.2.5 Fibre-to-the-Home (FttH)
10.2.6 Advanced broadband options
10.2.7 Video-on-Demand (VoD)
10.2.8 High-speed ISP services
10.3 Content and E-Services
10.3.1 Overview
10.3.2 E-commerce
10.3.3 E-banking
10.3.4 E-government
11. GLOSSARY OF ABBREVIATIONS


Exhibit 1 – China’s schedule for Internet liberalisation
Exhibit 2 - Selected Japanese broadband content initiatives – 2002 - 2004
Exhibit 3 – Korea Information Infrastructure (KII) Program – 1995 - 2005
Exhibit 4 – Major ISPs
Exhibit 5 – Confusion surrounding DSL statistics in South Korea
Exhibit 6 – Broadband service products by operator – 2005
Exhibit 7 – LMCS network operators
Exhibit 8 – Estimated B-WLL frequencies




Table 1 – Top 5 Asian Internet markets (by penetration) – March 2005
Table 2 – Top 5 Asian broadband markets ranked by penetration – 2004
Table 3 – Internet growth – 1999 - 2005
Table 4 – Top 10 Asian countries by Internet penetration – March 2005
Table 5 – International Internet bandwidth – 2000 - 2005
Table 6 – *VoIP revenue growth - 2003 - 2006
Table 7 – China’s IP telephony growth estimates – 2005, 2010
Table 8 – Broadband markets – December 2004
Table 9 – Major broadband access types (by subscribers) – December 2004
Table 10 – DSL subscribers – December 2004
Table 11 – Cable modem subscribers – December 2004
Table 12 – No. of WiFi hotspots (selected providers) – 2004
Table 13 – WiFi market forecasts – 2003, 2008
Table 14 – WLAN revenue forecasts – 2004 - 2009
Table 15 – KT’s broadband subscribers – 2002 - 2003
Table 16 – Broadband growth in Taiwan – 1999 - 2005
Table 17 – FttH growth in Japan – 2001 - 2005
Table 18 – Internet provider statistics – 2005
Table 19 – CNNIC Internet surveys – 2003 - 2005
Table 20 – Internet users – 1996 - 2005
Table 21 – Computers with Internet access (host computers) – 1997 - 2005
Table 22 – Distribution of bandwidth (Mb/s) – 2002 - 2004
Table 23 – Number of domain names registered under .cn – 2004 - 2005
Table 24 – Broadband subscribers in China – 2000 - 2005
Table 25 –Purchases* on e-commerce Websites – 2004 - 2005
Table 26 – Internet provider statistics – 2005
Table 27 – Internet user growth – 1996 - 2004
Table 28 – Internet access types – August 2004
Table 29 – Internet host computers – 1994 - 2003
Table 30 – Internet traffic volume (PSTN)* – 1997 - 2005
Table 31 –Internet traffic volume (Broadband)* – 2000 - 2005
Table 32 – Registered domain names – March 2005
Table 33 – Average residential web usage – May 2004
Table 34 – Broadband subscribers – 2000 - 2005
Table 35 – Broadband statistics – 2005
Table 36 – PCCW’s ADSL subscriber base – March 2004
Table 37 – i-Cable broadband subscribers – 2000 - 2004
Table 38 – Average residential web usage – May 2004
Table 39 – Internet provider statistics – 2005
Table 40 – Internet host computers – 1994 - 2005
Table 41 – Major forms of Internet access by subscription – 2001 - 2005
Table 42 – Cable modem and ADSL subscriber growth – 1998 - 2005
Table 43 – Broadband Internet subscribers – 2005*
Table 44 – ADSL subscriber growth – 2000 - 2005
Table 45 – Cable modem subscribers – 1998 - 2005
Table 46 – Cable operators providing broadband services – 2002 - 2005
Table 47 – FttH growth – 2002 - 2005
Table 48 – Internet provider statistics – 2003
Table 49 –Internet users – 1996 - 2004
Table 50 – Internet host computers – 1994 - 2003
Table 51 – Broadband statistics – October 2004
Table 52 – Internet provider statistics – 2004
Table 53 – Internet users – 1996 - 2004
Table 54 – Internet host computers – 1996 - 2003
Table 55 – Internet subscribers – 1999 - 2004
Table 56 – Internet provider statistics – 2005
Table 57 – Registered .kr domains – 1996 – 2005
Table 58 – Internet users – 1994 - 2005
Table 59 – Internet penetration rate – 2000 - 2005
Table 60 – Internet host computers – 1994 - 2005
Table 61 – Internet subscribers by system – 2001 - 2005
Table 62 – Broadband Internet subscriber growth – 1998 - 2005
Table 63 – Broadband Internet subscriber numbers by system* – 1998 - 2005
Table 64 – Broadband statistics – 2005*
Table 65 – Cable modem subscribers – 2000 - 2005
Table 66 – ADSL subscribers* – 2000 - 2005
Table 67 – Internet provider statistics – February 2005
Table 68 – Internet users – 1996 - 2004
Table 69 – Internet subscriber access – June 2004
Table 70 – Internet host computers – 1993 - 2003
Table 71 – Broadband subscriber growth – 2000 - 2005
Table 72 – Broadband subscriber by access – 2004
Table 73 – Chunghwa’s HiNet subscriber base – March 2004
Table 74 – GigaMedia broadband subscribers – 1999 - 2004