Chairman Hwang told those assembled that the company faced its first annual deficit in 2013 due to its sales declines in wired broadband, along with almost-flat growth in mobile subscribers. It was the worst time in the company's history, one that he called a "devastating year of poor performance." KT even had suspended new customer marketing for 45 days and asked 8,300 employees to voluntarily resign to help the company overcome this crisis.
Chairman Hwang went on to announce KT's rebranding of GiGAtopia, a phased program backed by a $4.4 billion investment that is aimed at reestablishing confidence in the firm.
While this was a promising announcement, concerns about cost quickly began to mount. The Korea CommunicationsReview later revealed, "[once] KT begins the service, it will have to deal with increased costs of investment in access lines. ...Not only that, costs of investment in backbone networks will also rise due to increased backbone traffic resulting from installation of Gbps-level access lines and more importantly because of fast-growing free-riding traffic like PSP [peer-to-peer]. This has been the biggest concern for KT."
As a result, KT is seeking government permission to institute volume-based pricing, limit traffic for heavy users and other measures before proceeding with this enormous investment. Any notion of having common carrier-like regulation simply is a non-starter, since South Korea, like the United States, operates under market constraints that require regulatory flexibility to promote the necessary investments for broadband networks.
This outcome should serve as a cautionary tale in the U.S.. A closer look at European broadband investment models, and a better understanding of actual broadband developments in countries such as South Korea, should help inform the FCC and Congress as they deliberate our nation's future broadband path and overall Internet growth.
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