South Korean VoIP Company Challenges Cellular Carriers' Infrastructure and Profit Margins
While European telcos are routinely throttling or blocking customer access to VoIP services or exploring ways to charge for access (see earlier blog post), South Korean cellular carriers have taken things a step further in their fight to preserve their revenue source: Three South Korean carriers asked for federal intervention, seeking a ruling from the Korea Communications Commission (KCC) to block KakaoTalk, a popular over-the-top (OTT) VoIP service provider.
The KCC's ruling, which earlier this month was expected to favor VoIP upstart KakaoTalk, took a different turn this week when it sided with the mobile carriers against the popular multimedia service. The KCC decision permits the three leading domestic mobile carriers — SK Telecom, KT, and LG UPlus — to charge customers accessing KakaoTalk's mobile VoIP services.
KakaoTalk Fires a Shot across the Bow with New VoIP Services
Seoul-based KakaoTalk began in 2010 as a smartphone (iOS, Android, Blackberry, Samsung) messaging platform using WiFi and 3G networks. A Rich Communication Suite (RCS), KakaoTalk supports individual and group texts as well as multimedia sharing and chat (with emoticons and graphics), and it integrates the phone's native contact list.
With profiles and status updates, the celebrity-endorsed app proved to be a popular social networking tool in a region that lives for social networking and mobile phones. It was like a Reese's Peanut Butter Cup: Two great tastes that taste great together.
By January of this year, the muscular chat app had over 30 million subscribers and was processing 1 billion text messages per day. That's about 10,000 texts per second.
In May, KakaoTalk introduced its VoIP function (Free Call) worldwide — except in South Korea, where the company correctly anticipated pushback from cellular carriers. Free Call lets KakaoTalk users make free voice calls — domestic and international — on any WiFi or 3G connection.
At the start of June, KakaoTalk pushed back, launching its free mobile VoIP service in South Korea, where 36 million (almost 72% of the South Korean population) of its 47 million subscribers reside.
The Refrain Remains the Same: Piggybacking Cuts into Our Profits
The argument put forth by the South Korean telcos is similar to that heard in Sweden (by mobile carrier Telia) and elsewhere where mobile VoIP apps are siphoning off profits: The app is using our network and cutting into our bottom line. How rude!
Of course, it is interesting how KT and SK Telecom's own users' VoIP calls — included for free with their premium, unlimited data plans — don't seem to imperil their services the way KakaoTime's do (although KakaoTime's VoIP use is probably more high volume, given that it's free).
"This is obviously too big a blow for us to absorb," an SK Telecom rep told the Korea Times last month. "If necessary, we will seek to team up with our rivals."
And that's just what they did. South Korea's domestic cellular carriers united to argue before the KCC that KakaoTalk's Free Talk function posed a significant danger to their existence. The carriers suggested that if the KCC did not block the OTT mobile VoIP app, they would be forced to raise prices. And certainly no one wants that to happen. (Jaded eye roll.)
KCC Loses Consumer Confidence with Flip-Flop
Before yesterday's ruling, the KCC had intimated that it would support KakaoTalk, having already noted that the service was lawful.
`"We think there are no serious problems for the current mobile VoIP service provided by Kakao Talk. A shutdown of the new service is highly unlikely," a KCC rep told the Korea Times.
Consumers in South Korea are not only upset with the regulator's decision (with most of the country using the popular multimedia messaging and social networking app, that was a little hard to avoid), they feel that there might have been some sort of informal collusion. The government's response to accusations of net neutrality violations is even less nuanced: simple protectionism.
"Companies such as Kakao Talk may seem invincible right now, but precedent says otherwise," one KCC official told the Korea Times. "Europe, like us, mostly limits access to mVoIP or charges for using services like Skype. The reason is simple: most firms just can’t withstand industry giants that are usually based in the United States."